2020 changed everything. We can no longer ignore the uncertainty of life. It is time to invest and secure your future. But which investment is the best option for you? Should you purchase stocks? Invest in forex or a money market fund or gamble in crypto? I have been exploring all these options myself. Please note I am not a financial advisor or a guru. Let us break down three investment options that you may be interested in.
A stock is a type of security indicating the holder has a portion of the company that issued it. Owning stocks is advantageous in the long term. They have proven to build up larger returns than cash and fixed-income investments. It is important to note that buying and selling prices fluctuate over time. Moreover, there are two types of stock; common stock and preferred stock, read below for the main differences. Please note that common stock is what most people refer to when they simply talk about stocks. Read a beginner’s guide to the Kenya stock markets.
Forex and the Money Market Fund
The Foreign exchange market (FX or Forex) is a global marketplace where different national currencies from all over the world are traded. Forex markets tend to be the largest and the most liquid because of the total volume traded in the world every day. Funds are transmitted electronically in this market. Additionally, it consists of the spot (cash) and derivatives market. In the spot market, buying and selling of currencies are at current market prices. While in the derivatives market, a contract is drawn to determine quantity, price and a future date of settlement of a currency. Read more about the Forex market.
On the other hand, a money market fund is where the trade of short-term financial assets such as cash and short-term debt instruments occurs. Trading in these markets is low-risk but also with low returns. It is important to note that the investment mature within a year or less. Government bonds and treasury bills are also traded here. A money market fund is not suitable as a long term investment since the returns are not massive. Subscribe to get notified when I post the different Money Market Fund options in Kenya.
Cryptocurrencies (Stocks Forex or Crypto)
Cryptocurrencies are digital assets that are traded via a decentralized network distributed across a number of computers. This means that the currencies are not under the control of governments or central authorities. Encryption techniques are used to secure the market as thus the name ‘cryptocurrencies’. Additionally, cryptocurrency transactions are based on blockchain technology. Blockchain is a digital ledger of transactions that is duplicated and distributed across the whole network. This makes it difficult or almost impossible to hack or fake a transaction.
Types of Cryptocurrency
Bitcoin, launched in 2009, was the first blockchain-based cryptocurrency. To date, it remains the most valuable cryptocurrency with over 18 million coins in circulation and a market cap of $999 billion. Additionally, the market has alternative cryptocurrencies, also known as ‘alt coins’, that have various specifications and functions. Visit here to check out the various types and categories of cryptocurrencies. You can make money in cryptocurrencies by mining coins or by selling them at a profit. Please note that cryptocurrencies are very risky although they are not affected by inflation. This is because there are a few firms and individuals who own the most valuable coins. These individuals greatly affect the supply and demand of crypto.
Advantages and Disadvantages of Cryptocurrencies
Below are some cryptocurrency resources;
Making a decision (Stocks Forex or Crypto)
Now that you have seen the different offers of the three options, making a decision should be easier. Here are a few factors to consider when making a decision;
- Consider your financial goals when making investment decisions
- Be precise on what and why you are investing for
- Evaluate your risk tolerance
- Consider a mix of investments
- Research intensively and take your time to make a decision
Which one will be looking more into?