Is Investing in Green Energy Financially Savvy?

The global market for green energy is expected to grow to a value of $1.5 trillion by 2025. 

When you consider the fact that this was a market that barely existed a few decades ago, it’s obvious that investing in green energy has made many people rich. It’s also going to continue making people rich for as long as the world needs renewable energy, which is likely to be forever.

The question, therefore, is this: what is the best way to make money from the green revolution if you’re new to the game?

Read on as we look at the answer to that question and set you on the path to becoming a profitable green investor.

The Different Ways of Investing in Green Energy

There are many different ways to get exposure to green energy. The right one for you will depend on your risk appetite, the amount you want to invest, and whether you want to be actively involved in the investment.

We’ve looked at the different options in more detail here.

Starting a Business

If you want to take an active hand in the green energy market, you could set up a business in the field. There are a few different options here.

Wind and solar energy are the two main forms of renewable energy in the world today. If you enter this industry, you’ll likely be setting up either a wind farm or solar farm.

This is, of course, specialized work. You’ll need an educational background in energy or physics, and you may need prior professional experience of working with renewable energy.

In order to produce energy on an industrial scale, you’ll also need to make a considerable initial investment. Solar panels and wind turbines are both expensive to buy in bulk. They also take up considerable space, which means that you’ll need to have a large plot of land to work on.

Buying Stocks

If you don’t want to set up a green energy company yourself, you could choose to invest in one that’s already in operation.

There are many different options here, from established energy giants to brand new operations. The latter will not feature on public stock exchanges, however, so you’ll need to look to different investment platforms for these.

If you invest in a new start-up while its shares are cheap and it goes on to create highly valuable energy solutions, you could end up multiplying the value of your investment many times over. On the other hand, if the company goes bankrupt, you’ll lose all your money.

If you’d prefer a lower-risk stock investment, it might be a good idea to look for a publicly-traded, blue-chip green energy company.

Investing in a Green Mutual Fund or ETF

This is similar to investing in green stocks. It will offer passive exposure to the green energy market, giving you financial benefits if and when the market as a whole improves.

The key difference between this and the option of buying company shares is the risk-reward profile. Because funds diversify your investment across a large number of ventures, you won’t lose all your money because of one company’s bad decisions.

However, you will also have a much more limited growth capacity. 

There are a couple of important differences between an ETF and a mutual fund. Most significantly, a mutual fund is actively managed, which means that fund managers will pick up and drop stocks in real time on the basis of market trends.

ETF managers, on the other hand, pick a basket of stocks or index at the fund’s inception and leave them in place regardless of trends. Because of this passive strategy, ETF fees tend to be much lower.

Setting Up Solar Panels or a Windmill

This admittedly isn’t an investment in the business sense. However, that doesn’t mean it’s not a great bet.

Recent COVID-19-related dips aside, fossil fuels are getting more expensive. As oil-producing countries tinker with the supply chain and the reserves of natural fuel continue to dwindle, the price of non-renewable energy will eventually become unsustainable.

When that happens, the homes and businesses that are self-sufficient in terms of energy will be much better off. If you live in an area that gets a lot of sun or wind, this is something you should consider.

The Advantages of Investing in Green Energy

The main advantage of investing in green energy is the market outlook. There aren’t many industries with as bright a future as renewable energy.

Green companies also benefit from government subsidies and tax breaks in many areas. Because many places desperately need green energy, ruling bodies are happy to incentivize its development in whatever ways they can.

To make the most of this, you should research political attitudes to green energy in a given country before deciding to invest in a company from there.

Depending on the investment you make, you might also be helping to fund a company that makes a real breakthrough in the field of clean energy. There are countless capable energy specialists that only need start-up capital to start building the energy solutions of tomorrow.

Investing in the Energy Solution of Tomorrow

When it comes to investments with future value potential, you might find it difficult to come across a better option than green energy. Our planet’s energy requirements are massive, and continuously growing, while non-renewable energy resources continue to dwindle.

Investing in green energy is therefore likely to be a successful strategy. However, to make sure you take on an investment that suits your goals and outlook, you’ll need to do a little research on the various available options.

To learn more about investment opportunities, check out our finance section.

What Happens When You Declare Bankruptcy in the Philippines?

After East Asia’s financial crisis in the 1990s, middle-income countries including the Philippines made up 80% of the total East Asian bankruptcies filed

Do you know what happens when you declare bankruptcy in the Philippines? We’re coming up on another financial crisis, so now is the best time yet to learn your legal rights. That’s why we created this guide. 

Are you considering filing bankruptcy in the Philippines and want to know what to expect? Then you’ve got to keep reading because this article is for you.

What Exactly is Bankruptcy?

Bankruptcy is a legal process that takes place after an individual or company has defaulted on a debt. 

Filing bankruptcy allows individuals options to either repay or offer collateral to erase their debts. At the same time, bankruptcies allow the bank or other lending institution to remove bad debt from their ledgers. 

When the bankruptcy filer can’t repay debts, they typically end up divesting an asset. An asset is anything a company or individual owns outright. For example, buildings, homes, cars, etc. 

The Philippines Bankruptcy Law: The Financial Rehabilitation and Insolvency Act

The Financial Rehabilitation and Insolvency Act (FRIA) legally allows the declaration of bankruptcy in the Philippines. Individuals can file for personal bankruptcy. Companies will file for business bankruptcy. 

In the Philippines, there are three ways to file bankruptcy legally. We’re going in-depth with each method next, so check it out.

Suspended Payment

In some cases, an individual or business filing for bankruptcy can repay the debt over time. A Philippines court will restructure the debt payments to allow for a longer period of repayment. 

Suspended payment bankruptcies are allowed when:

  • The debtor has the collateral to cover the debt but can’t meet payments by their due date
  • The debtor presents a restructuring payment plan that is both possible and agreeable to the lending party
  • Creditors or lenders who hold 60% of more of the debt liability get together and agree on the debtor’s proposed repayment plan

Once the lender agrees to the debtor’s restructuring strategy, the debtor can proceed with the suspended payment bankruptcy agreement. 

Voluntary Insolvency

With voluntary insolvency, an individual or business defaults on a debt. Unlike suspended payment bankruptcies, voluntary insolvencies allow debtors to voluntarily give up assets to repay debts. 

To file for this type of bankruptcy, the individual or company must have assets that sufficiently balance out the debts owed. However, these debts must be in excess of P500,000. 

Individuals or businesses filing for voluntary insolvency are responsible for petitioning the court. The court will then determine whether the collateral offered is equal to the debts owed.

Within five days of approving the petition, the court will issue a liquidation order. Liquidation orders allow the original lenders to claim the proposed collateral to settle the debt.

Involuntary Insolvency

Involuntary insolvency is different from both suspended payment and voluntary insolvency bankruptcies in the Philippines. Why? Because Philippine creditors and lenders, not debtors, initiate involuntary insolvency.

Under FRIA in the Philippines, lenders with claims of P500,000 or more can file a petition with the courts. The court should be that of the city or province where the debtor lives. 

This petition will outline that, upon default of the debt, the creditors will seek liquidation. If the debtor does default, the court can order the lender to seize the individual or businesses’ assets. 

Civil Small Claims

In some cases, a lender can file a civil small claims case instead of choosing involuntary insolvency. This can only happen for debts of less than P400,000. The proceedings of a small claim case tend to be cheaper and quicker, which is why many creditors are more likely to use it. 

The bad news? Individuals and businesses can’t actually have legal representation in small claims cases. If creditors win, debtors can’t appeal the ultimate decision either. 

What Happens When You Declare Bankruptcy? 

Bankruptcy is an extremely helpful tool for individuals and companies that can’t pay back debts they owe. Yet, bankruptcy isn’t without some serious consequences. Here’s what to expect after filing bankruptcy. 

Your Credit Score Will Drop

After filing for bankruptcy, it will stay on your credit report. The bankruptcy will also lower your credit score. This will make it difficult to open lines of credit or apply for a mortgage in the future. 

You Could Lose Your Stuff

If you go through voluntary or involuntary insolvency, you’re going to lose your assets. Debtors can choose which assets they’d prefer to divest in voluntary liquidation. Yet, if your lender files for involuntary insolvency, you’ll have no control over which assets they take from you.

You May Lose All Your Credit

Many credit card companies will immediately terminate your lines of credit after a bankruptcy. This is especially true if your credit card company is the same bank filing bankruptcy against you. 

You Could Have Trouble Getting a Loan

We’ve already mentioned that a lower credit score means more problems getting a mortgage. This is also true for loans in general. Not only that, lenders see bankruptcies as a huge red flag, meaning you may have to pay ridiculously high interest rates for loans.

You May Not Get a Tax Refund

If you qualify for a tax refund in the same year you filed bankruptcy, you may not receive it. 

You Could Face Difficulties Finding Housing and Jobs

Many employers and building owners pre-screen potential candidates for bankruptcy. Some employers won’t hire you if you’ve recently filed for bankruptcy. Worse, recent bankruptcy can affect your desirability as a tenant. 

More Financial Advice from Capital Finance International

Now that you know what happens when you declare bankruptcy in the Philippines, you should feel confident knowing your rights when you can’t repay a debt. 

Are you looking for more financial advice during these trying times? Then don’t forget to subscribe to our finance blog for new updates every week. 

Cryptocurrency 101: Learn the Basics

Unless you’ve been living under a rock, you’ve heard of cryptocurrency. Cryptocurrency is a virtual currency that could replace our cash system one day. 

Virtual currencies like Bitcoin are working to cut out the middle man in our banking transactions. Read this article to learn cryptocurrency 101 and whether you should invest or pass. 

Cryptocurrency 101

Cryptocurrency is a virtual or digital currency. It is secured by cryptography. Cryptography is a method of encoding and decoding data. Essentially cryptography puts the “crypt” in cryptocurrency. Cryptography makes it almost impossible to counterfeit money. 

Cryptocurrencies (yes there are more than one) use blockchain technology. It works by dispersing a ledger among a network of computers. These computers all work to keep up with it. 

Understanding Cryptocurrency: How it Works

With cryptocurrencies, there isn’t a central authority. They are not issued by a government or a bank. In theory, this makes cryptocurrencies free from government interference or manipulation.

Payments are made online using “tokens”. The ledger keeps track of all the entries and how much currency everyone has. Verifying transactions is usually the role of the banks but cryptocurrency relies on the peer-to-peer system. 

This system allows for your transactions to be secure. It reduces the risk of fraud and allows your transactions to be more transparent. 

Popular Cryptocurrencies 

Bitcoin was the first blockchain-based cryptocurrency. It was started in 2009 by an individual known as Satoshi Nakamoto. Today it remains the most popular and valuable. 

Since Bitcoin started there are now thousands of different cryptocurrencies people can use. Each cryptocurrency has its function in the market. Some of these cryptocurrencies copied Bitcoin and others were built from scratch. 

At the time of this article, USD 27.5 billion BTC has been traded in the past 24 hours. A single token or BTC of Bitcoin is worth USD 9,435.04. 

Other popular cryptocurrencies include Litecoin, Ethereum, Namecoin, Cardano, and EOS. If we calculator the total value of cryptocurrencies all together that number would be around USD 251.8 billion. To put that into perspective that is about 0.7% of the world’s money. 

Is Cryptocurrency Safe?

Cryptocurrency experts would remind you that Investing is always a risky business. However, Some traditional experts say investing in cryptocurrencies, like Bitcoin, is even more of a risk. 

The world has been caught up in “crypto-mania” as people began buying and selling cryptocurrency like stocks. We’ve all heard the stories of people who became millionaires overnight thanks to Bitcoin business opportunities. 

We’re not going to suggest investments. That should be left to you and your portfolio manager. However, we will say you shouldn’t invest in something you don’t fully understand. This advice goes for any investment. 

Pros of Cryptocurrency

There are a lot of pros of cryptocurrencies. Cryptocurrencies make it much easier for two parties to exchange funds. No longer do you need a bank or credit card company to serve as a middle man. 

The transfers are secure. There is very little risk of counterfeiting or double-spending. They are also completed with very minimal transfer fees. The fee is much lower than the charge for a wire transfer from a bank. 

With more customers choosing to make payments from their mobile phone, tablet, or Apple Watch, cryptocurrency is a cheaper and more efficient system for payment. 

Cryptocurrencies have the potential to create a borderless, global economy. That’s a win for everyone (well, maybe except banks). It can help fight financial inequality by taking out the bank and credit card middlemen and bring financial services directly to the people.

Cons of Cryptocurrency

Cryptocurrency sounds great but there are a few drawbacks to blockchain the technology it is based on. For one, blockchain isn’t as scalable as centralized banking systems. If you’ve ever made a bitcoin transaction then you noticed it took some time to complete. 

Remember the ledger we talked about? The blockchain network of computers is kinda slow to make changes to the ledger. And if you think it is slow now just think about how slow it would be if more people started using bitcoin!

Another common issue is that you can lose your cryptocurrency hack. When you purchase cryptocurrency most people store it in their wallet. Wallets are located on the exchange.

Billions of dollars of Bitcoin and other cryptocurrencies have been lost on the exchange from hackers. 

A smarter place to store your cryptocurrency would be on your smartphone’s cryptocurrency wallet because generally speaking, smartphones are not hacked. 

But even if you use a wallet on your smartphone it is still possible to lose your cryptocurrency. You could misplace or forget your “key” or password for the account. There is no forgot my password link to click with cryptocurrencies.  

Your phone’s OS, operating system, could also become corrupt. This could delete your wallet from your phone. Bye-bye cryptocurrency. There is hardware now available for people to back up and secure their wallets. 

Trading Cryptocurrency 

If you are trading cryptocurrencies, there will be fees involved. These fees are still a fraction of a per cent of the total transaction amount depending on the cryptocurrency exchange you use. You can also avoid some fees by using your wallet.

The fees involved will vary depending on the total number of people who are buying and selling your particular cryptocurrency.

In general, the more people the higher the fee. In the beginning, when most people had never heard of trading Bitcoin the transaction fee was around 6 cents. Today that fee is much more and it is always changing. 

Consult With Your Financial Advisor

We hope you enjoyed reading cryptocurrency 101. Many positive benefits could come from a virtual currency like Bitcoin or others. There are also many other positive benefits blockchain technology has in healthcare or voting systems that are also being explored. 

Be sure to subscribe to our print magazine and follow us for more content on technology, business, investing, and finance. 

How Do Mutual Funds Work? The Complete Guide to Mutual Funds

Are you a long-view investor with an interest in seeing your wealth grow over 10, 20, or 30 years? If the answer is yes, then you need a diverse portfolio of assets to help you achieve your goals.

One of these assets is a mutual fund. Mutual funds are a collection of assets grouped together according to an investment strategy and run by a fund manager. Compared to individual securities, mutual funds provide a certain level of protection against the volatility of the stock market and still deliver steady returns for investors.

How do mutual funds work? Keep reading for a quick primer.

What Are Mutual Funds?

Mutual funds are called investment baskets. Rather than being one form of security or investment on their own, mutual funds are a container for a group of different types of investments, usually stocks, bonds, or a combination of the two. However, they can contain other types of investments. The primary types of mutual funds include:

  • Equity funds
  • Bond funds
  • Balanced funds (equities and bonds)
  • Money market funds
  • Fixed-income funds

When you invest in a mutual fund, you invest in the basket of investments rather than a single stock or share. You also pool your money with all the other fund investors, which grants you access to investments that aren’t available to the average solo investor.

How Do Mutual Funds Work?

A mutual fund has a fund manager, who oversees the fund and chooses the investments found within it. The manager may choose to actively or passively manage the fund according to a set strategy or according to the manager’s whims.

Many mutual funds are increasingly passively managed because research shows that passive investments earn better returns compared to actively managed investments. It’s rare for active investment strategies to outperform the market.

How does the mutual fund make money? It depends on the type of fund you choose. When your investment earns you returns, it comes in the following forms:

  • Income earned via dividends
  • Growth in price of securities or capital gains
  • Fund share price (net asset value) grows

You’ll also pay fees for your mutual fund. These include the cost of the fund (e.g., administration and operating costs) and sales commissions. Keep in mind that these fees are typical percentages of the fund, and you’ll pay them annually. A fraction of a percent can be the equivalent of thousands of dollars.

The fees you pay depend on the structure of your fund. It pays to research the type of fund that best suits your financial goals and to compare fees between funds and fund providers.

Why Choose a Mutual Fund?

Mutual funds are increasingly popular because they offer even the novice investor something that the pros could only covet a few years ago: a diversified portfolio. Because you invest in a basket of investments, your profits and losses aren’t solely tied to one company’s performance. Diversity means you have a lower risk of losing everything if a stock performs badly.

Another reason investors of all types choose mutual funds is that they come with a fund manager. You don’t have to actively trade them or even worry about all the investments inside the basket. You pay the investor a fraction of a percent of the value of your account to worry about that for you.

By working this way, mutual funds use a high volume of transactions to reduce the cost for you as an individual investor. Rather than paying as much as $5 a transaction, you split the bill with other investors.

Are There Disadvantages of a Mutual Fund?

Mutual funds do come with disadvantages compared to other types of funds like exchange-traded funds (ETFs).

The biggest issue that investors find with mutual funds is that they can be expensive. Typically, mutual funds become very expensive with a small investment and then again at the top of the scale. Many providers offer the best rates to those with mid-size accounts.

Another issue with mutual funds is that they can be inefficient compared to ETFs. Efficiency applies both to tax efficiency and the cost of maintaining the fund vs. the returns it offers. ETFs generate fewer capital gains distributions, and they have their own way of buying and selling that triggers less taxable income. However, you may find that some passively managed mutual funds are also tax efficient if only because they generate fewer transactions.

How to Find the Right Mutual Fund

Although there’s a shortlist of widely popular mutual funds, a fund’s popularity doesn’t necessarily mean it’s right for you.

Finding the right mutual fund requires you to find a fund that meets both your financial goals and your risk tolerance as well as a philosophy that reflects your own investment philosophy.

From there, you can start to consider the costs of the fund and the management style to whittle down your list of contenders and begin investing.

Use our guide to choosing the best performing mutual funds to get started.

Are Mutual Funds Right for You?

How do mutual funds work? They pool investors’ money together in a basket of securities to provide long-term growth with some protection from market volatility.

Mutual funds are a diverse group of investment tools, but almost every investor can see some benefit in adding top-performing funds to their portfolios. The trick is to find the fund that best matches your personal goals and your investment philosophy and strategy.

Looking for more investment content? Visit our Finance archive for the latest news.

What Are the Types of Mutual Funds?

When one wants to build their capital, the stock market is often the first port of call. But investing in the stock market is often not worth the stress. In the worst of times, investing in stocks have bankrupted investors. 

You wish to invest your money but are frightened that you may lose it all. With the financial crises that we have collectively experienced, one is right to be hesitant.

Fortunately, there is an alternative option. Mutual funds are a great avenue for investors.

But with all the different types of mutual funds available, we cannot blame one for feeling puzzled as to which ones to invest in.

While we aren’t here to advise you, we can explain the different types of mutual funds so you can make a better decision on where to invest.

The Guide to Types of Mutual Funds

A mutual fund is a fund created when a plethora of investors put in their money in securities, bonds, money market instruments, and a variety of other assets.

This pool of money is what you would invest in. The mutual fund is controlled by a money manager who attempts to produce capital gains income for the investors.

We suggest seeking the aid of a financial consultant when deciding to invest. 

Here are the different types of mutual funds for you to consider:

1. Equity Funds

Also known as stock funds, this is the most popular type of mutual fund. Equity funds will have different subcategories. These can include subcategories based on the size of the company (large, mid-size, small) or the type of company (tech, finance, etc.)

There are also equity funds defined by their approach—this can include aggressive growth, slow growth, or income-oriented.

To choose the best equity fund, you want to look at the subcategory as well as the investment approach. For example, you may wish to invest in a technology equity fund that has aggressive growth.

2. Fixed-Income Funds

This type of mutual fund offers a set rate of return. These include government bonds and corporate bonds. The mutual fund will generate income which is how the investors earn.

The money manager usually focuses on bonds that are undervalued. They purchase these bonds and then focus on selling them to make a profit. They can be risky as one can never guarantee the outcome or value of the bonds.

There is also the issue of the interest rate risk—which means that the value of the bonds will decrease if interest rates increase. On the plus side, this type of investment usually pays higher than money market investments and certificates of deposit.

3. Index Funds

Index funds have become increasingly popular. With this option, one chooses a portfolio of stocks to invest in. These can include the S&P 500 and the Dow Jones index.

While a money manager would look at these index funds, this type of mutual funds requires a more hands-off approach. 

This type of mutual fund is targeted toward the investor on a budget. If you are a beginner to investing, you may wish to consider index funds over other types of mutual funds.

4. Money Market Funds

This type of mutual fund is also a fixed-income mutual fund. This fund focuses on high-quality debt from corporations, banks, and governments. This debt is usually short term.

These type of funds include U.S. Treasuries, commercial paper, certificates of deposit, among others. An ideal money market fund will be: low risk, will produce high yields, and will require low expenses.

These are considered to be one of the safest investments available. They are used by beginners and seasoned investors alike.

5. Balanced Funds

Balanced funds, or asset allocation funds, are a combination of fixed-income funds and equity funds. They have a fixed ratio of the two funds. For example, you may have a balanced fund that is 70% equity fund and 30% fixed-income fund.

One type of balanced fund is target-to-date which alters the ratio to favour equity funds as you get closer to your retirement.

6. Income Funds

This type of fund is intended to provide a continuous income on a regular basis.

Usually, these funds consist of government and corporate debt. The funds hold onto the bonds until they mature and produce interest. 

As they provide continuous income, they are usually targeted toward retirees, conservative investors, and can also be beneficial to beginners. But because they produce regular income, one must be aware of possible tax obligations.

7. Foreign Funds

Generally speaking, foreign funds (funds outside of your home country) can be volatile. It is imperative that if one invests in foreign funds, that adequate research is conducted on the stability of the jurisdiction.

At times, the foreign fund can be far riskier than a domestic fund. At other times, the foreign fund may be much safer than domestic funds. Make sure your money manager has adequate experience in managing foreign funds.

You should also do your research on the stability, country, and political risks of other jurisdictions.

As the economies of other nations grow, you may find that investing in a foreign fund is more lucrative than investing in Britain.

8. Speciality Funds

These are usually funds that have gained popularity among investors. There are no set criteria other than the popularity and success of these funds.

For instance, there are sector funds that target particular industries. One can select a successful fund in the technology sector, agriculture sector, or in healthcare. One should be aware of the possible volatility of a sector before investing in it.

Speciality funds can also comprise of regional funds that focus on successful mutual funds in particular regions—ranging from nations to continents (i.e., investing in Peru vs investing in South America as a whole).

Finally, we have seen a keen interest in ethical funds. These are funds for socially-responsible mutual funds such as solar energy, green energy, waste management, etc.

Build Your Portfolio

Now that you know the different types of mutual funds, you are ready to consult your financial advisor and build your portfolio.

Be sure to follow us for more content on technology, finance, business, and economics.

7 Benefits and Reasons to Invest in Mutual Funds

According to industry watchers, the net asset value of mutual funds across the United States stood at $17.71 trillion as of 2018.

Many individuals are looking to put their wealth into securities and other assets. However, due to the small size of their checks, investing in securities carries high costs.

Mutual funds come in to help aggregate individual investors. A principal mutual funds advantage is that you enjoy more convenience in investing. Here are seven reasons why a mutual fund is right for you.

What Is a Mutual Fund?

A mutual fund is an investment firm that brings together money from various investors to buy large-sized assets.

The assets that mutual funds typically put their money into are stocks, bonds, and other securities. The total sum of all the holdings a mutual fund invests in is called a portfolio and is managed by paid professionals.

When you give a mutual fund your money, you’re effectively buying its shares to become a part-owner earning from the income it generates. 

How Mutual Funds Work

Regardless of the kind of fund you invest in, its performance (and revenue) will depend on its kind of management.

A passive mutual fund will invest according to a set strategy whose goal is to match a particular market index. As a result, these kinds of mutual funds don’t require you to have deep investment skills.

Passive funds charge lower management fees since they don’t call for as much hands-on management.

It’s worth noting that two popular types of passive mutual funds today are exchange-traded funds (ETFs) and index funds.

Actively traded funds, on the other hand, work to outperform the market indices. Consequently, they hold the potential to earn you more. They also carry a higher risk than passively traded funds, which you must put into consideration.

How Do You Make Money With a Mutual Fund?

Once a mutual fund makes a profit, there are three ways that you, as an investor, can earn a return – dividends, net asset value (NAV), or capital gains.

Dividends come from when the fund receives interest on the share it holds. Each investor in the fund gets a proportional amount, and you can choose to reinvest that in the fund.

When a mutual fund sells a security at a higher price than it bought it, it makes a capital gain. You’ll receive your portion of this income annually from the fund.

NAV is where the security you own increases in value due to the fund’s astute management. While you don’t immediately receive funds from the growing NAV, it means you stand to make more money should you sell your stake in the fund.

Mutual Funds Advantage

Mutual funds hold distinctive advantages as tools to help you grow your wealth. These benefits include:

1. Your Investment Is Diversified

Any financial consultant will tell you to take a diversified approach when it comes to wealth management. Diversification is whereby you mix the resources and investments in your portfolio to reduce the risk you face.

A mutual fund helps you to access various investments that face varying risks that can offset one another.

As a result, if a crisis or loss hits one sector, you won’t face as significant a loss as investments in other sectors can help offset the outflows.

2. Economies of Scale

One of the most compelling features of a mutual fund is the scale at which it operates. When many investors come together and pool their funds, they can buy into more lucrative assets that would have been hard to purchase as individuals.

Additionally, because of the large size of mutual funds, individual investors pay less for the service.

3. There’s Professional Management

If you don’t like picking the stocks to buy due to a lack of time or in-depth knowledge, then a mutual fund is for you.

Each mutual fund employs professional managers who do the heavy lifting with the research, picking stocks, and managing the portfolio. Thus, you get to access a full-time investment manager to help you grow your holdings at a fraction of the cost.

4. Liquidity

When you’re considering an investment as an individual investor, you have to assess its liquidity. The easier it is to sell what you hold, the faster you can access your money when you need it.

You can buy and sell a mutual find relatively easily unlike say disposing of property you have invested in.

In case you need money urgently, you can sell your holding in the fund fast. Should you spy out an opportunity in a sector your fund invests in, you can quickly and easily take up a position to benefit.

5. There’s Variety

As an individual investor, a mutual fund opens up a variety of options to put your money in that you’d not access on your own.

For example, a manager can run a fund that employs several investment approaches. You can access value investing, macroeconomic investing, and other methods all in one package.

Some mutual funds (known as bear funds) are structured to make money from a falling market. Such funds can enable you to protect your downside in ways you couldn’t as an individual.

Through this variety, you get to access foreign and domestic deals that can attractively grow your portfolio.

6. Easy Access to Specialized Sectors

If you’re interested in securing a position in complex sectors as an individual investor, then a mutual fund is the best tool to use.

Mutual funds have built up a track record of tackling extremely complex investment areas in a logistically easier manner for you. With one, low ticket investment, you get to outsource all the hard work that goes into such investment selections.

7. Transparency in Investment

Where you put your hard-earned money to work for you must be secure, and mutual funds give you this advantage.

Every mutual fund is heavily regulated to ensure investors are treated fairly. Therefore, with a mutual fund, you can have peace of mind since there is greater visibility into where you invest your money.

Let Your Money Work for You

Securities are a great way to grow your wealth, but as an individual investor, it can be costly to invest in them. A mutual fund is a vehicle through which your small check can make consistent returns. Another significant mutual funds advantage is the convenience you have as professional managers handle things. Pull together with other small investors to gain access to consistent investment returns.

Capital Finance International (CFI.co) is your premier online resource for all things investment. Reach out to us today for news, commentary, and analysis that will shift your investment thinking.

How to Choose the Best Performing Mutual Funds

The total net assets of mutual funds worldwide were over $14 trillion in March of this year.

Mutual funds are a hugely popular investment vehicle globally. However, there are a huge number of them out there, with the quality of returns varying significantly from one to the next.

For a newcomer to the world of investment, it can be difficult to know what to look for in a mutual fund. The best performing mutual funds in the past may not continue to post exceptional returns in the future, especially in these uncertain economic times.

Read on as we take a closer look at mutual funds, and what to look for when investing in one.

What Is a Mutual Fund?

A mutual fund is a type of investment fund. A team of professional investment managers take capital from a large number of investors and invest the resulting pool of money in various securities.

Essentially, it is a means of investing in capital markets indirectly. Rather than picking stocks or bonds and putting money into them yourself, you allow a mutual fund manager to make the choices for you.

The advantage of this is that your investments are made by a highly experienced investment professional. This is safer than picking investments yourself, especially if you’re new to the world of investment.

The Different Types of Mutual Fund

There are many different mutual fund types. You can categorize them on the basis of the types of securities they invest in, the way they are managed, and the level of risk they take on in seeking returns.

To pick the best mutual fund for your needs, you need to know what your investment objectives are. These will dictate the type of fund you should pick.

Index Funds

Index funds are so named because they track the performance of a given index. Common indexes that form the basis for these funds include the S&P 500, the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite (IXIC).

Index funds are an example of a passively managed fund. No input is required from investment managers, as the fund simply tracks an index.

Passively managed funds typically have much lower fees than actively managed funds for this reason. As outlined below, many investors who want a passively managed fund opt for an ETF rather than a mutual fund.

Stock Funds

Stock funds invest in a range of different stocks. Unlike index funds, fund managers actively pick these stocks individually and will chop and change them based on market trends.

Stock funds are therefore an example of an actively managed fund. Their fees are higher than some alternatives.

Stocks are riskier securities than bonds or other fixed-income securities. The risk of loss with a stock fund is therefore relatively high, but the opportunity for gain is greater as well.

Investment approaches vary widely from one stock fund to the next. Some managers will make more of an effort than others to diversify their holdings and hedge risks.

Specialty Funds

Specialty funds can be thought of as occupying a kind of middle ground between stock funds and index funds. Investment managers pick the stocks themselves, but within certain boundaries.

These boundaries typically relate to a market type. For instance, a cannabis market specialty fund will only invest in cannabis stocks.

Fixed Income Funds

Fixed income funds invest in low-risk securities. These include Treasury notes and bonds, as well as highly-rated corporate bonds.

These mutual funds cater to investors who prioritize income over growth.

If you’re simply trying to manage your money better with a view to long-term savings, a fixed-income fund might be just the thing for you.

Mutual Funds vs Other Fund Types

There are other types of investment fund that you may have heard about. While these can bear similarities to mutual funds, there are important distinctions to be drawn in each case.

Exchange-Traded Funds (ETFs)

The ETF is a close cousin of the mutual fund. Both types of fund take payments from investors and use these to invest in a variety of different securities.

ETFs tend to focus more on passive strategies than active ones. Many ETFs track indexes.

Mutual funds also tend to have more complex structures and a greater variety of share classes.

Hedge Funds

Hedge funds are another type of pooled investment fund. However, there are a number of important differences to be aware of with hedge funds.

Hedge funds use a number of complicated strategies to extract higher returns from their investments. These include high-frequency trading and short selling. 

Hedge funds typically charge much higher fees than mutual funds.

Because of their complex, risky strategies, hedge funds are generally only available to professional investors, or those with a large number of investable assets.

What Sets the Best Performing Mutual Funds Apart?

There are certain mutual funds that regularly outperform their competition. While it is impossible to say exactly what the winning formula is for these, there are certain things that profitable funds have in common.

The first thing you should look for is a low expense ratio. A better approach to cost management means lower costs for you, and also indicates fiscal prudence on the part of the fund managers.

For actively managed funds, quality management is the key consideration. Look for managers with a proven track record of providing results.

Putting Your Money to Work

Mutual funds are a diverse family of investment vehicles. Some are designed to seek huge gains, while others simply aim to provide steady growth for clients looking to retirement.

The best performing mutual funds have consistent objectives that they stick to. The best investors do exactly the same thing. 

When you’re deciding on your next mutual fund investment, start with a clear goal in mind.

If you’d like to learn more about the work we do or the topics we cover, contact us today.

How a Financial Consultant Can Help You

For most people, money is one of the primary driving forces in their lives. After all, you need it in order to buy food, shelter, clothes, and all other goods and services. 

Money causes stress while also providing a sense of security. Much of your time and effort are invested in your career to provide a certain standard of living for your family and to prepare for retirement. 

A skilled financial consultant can help you reduce debt and make the most of your money. This article takes a look at the reasons why you should consider working with an advisor to prepare for the future.

They Help You Understand Your Goals

Believe it or not, many people have no idea what they really want. Even though the average life expectancy is around 73 years, few people approach the future with any sort of goals in mind.

A lot of the population lives paycheck to paycheck, without much rhyme or reason to their financial decision-making. 

A chartered financial planner will ask a series of questions designed to encourage you to think about the future so that you can plan accordingly. This will enable you to be conscious of the financial decisions you make going forward rather than simply winging it as you have in the past.

They Help You Develop a Plan

Once you’ve figured out some of your long-term goals, you’ll be able to develop a plan for how to actually reach those goals.

A good plan provides structure, enabling you to create a step by step roadmap that can be adjusted year after year as your wealth grows and your goals shift and change. 

Advisors are skilled at building a financial investing plan. This will be specifically tailored to meet your needs. The more specific you can be about what you want out of life, the more they can help.

They Show You the Best Ways to Invest

There are many ways to invest your money. Each type of investment tool offers different degrees of risk and reward. The key is to understand how aggressive you want to be in building wealth.

This requires working closely with your advisor.

Be open and honest. This will provide valuable information that will help them know how best to proceed. It’ll also help them find the most efficient resources and tools to utilize when managing your wealth.

Keep in mind that an experienced financial advisor will explain all the investment options that are available, along with the pros and cons that come with each. 

Don’t feel pressured to invest too aggressively, but also listen closely to their advice. Try to be as open as possible to educated advice regarding ways to maximize your investment funds.

They Help Avoid Stupid Investments

It’s important to remember that your financial advisor is an expert. Investing is a complicated business, with an incredible amount of data to track and variables to consider. 

Because of this, it can be easy to make a mistake, to chase a trend that’s leading to a dead-end, or to find yourself excited about an investment opportunity that will only end up costing you money and causing frustration and pain.

An experienced advisor will help you avoid as many mistakes as possible. They have the training and skills needed to identify bad trends and unreliable sectors in the marketplace.

It can be hard to trust someone with your money. Especially when you feel like you’ve discovered a great investment opportunity. Yet, trust is exactly what will be required in order to build the level of wealth that most people only dream of.

They Provide a Sounding Board

A good advisor will also be a great listener. This might not sound like a big deal, but it’s actually one of the most important qualities to look for when seeking an investment professional.

You should never feel hesitant to talk to your consultant like a real person. Tell them your hopes and feelings. Mention ideas you’ve been thinking about, and never feel stupid for asking tons of questions.

Remember, they work for you. They are there to answer questions, provide feedback, and help give you confidence that your future is on the right track.

They Help Enforce Financial Discipline

Saving money isn’t fun. It can be a huge challenge. 

After all, it’s much more exciting to spend money on shiny new toys rather than sock cash away for the future.

This is another reason why an experienced consultant is so valuable. They will help you keep your eyes on the prize because they won’t have any emotional attachment to your finances. This means they can approach making smart investments and building your wealth from a purely educated and logical vantage point. 

They Help You Connect With Other Professionals

Your financial advisor will also connect you to a good lawyer and accountant. This will help ensure that your money matters are legal, and keep any potential tax issues from arising.

They Help You Relax 

Finally, knowing that you have an experienced consultant on your team will help you relax. You have a pro working for you, after all.

They’ll choose investments that will make your money work for you, and grow your wealth day after day. You can rest assured knowing that when you’re ready to retire, you’ll have the resources to enjoy your golden years to the fullest.

A Guide to the Benefits of Hiring a Financial Consultant

Planning for retirement can be confusing. Fortunately, hiring a skilled financial consultant will help make the process a little less stressful.

Click here to learn how to form an investing strategy for European markets.

Is Now a Good Time to Invest? Buying Stock During a Pandemic

The global pandemic has lead to a lot of predictable anxiety, lockouts, and business closures in the last few weeks and months. It has raised many legitimate questions about global finances, with one very important one weighing on investors. “Is now a good time to invest?”

What are the more robust markets to invest in right now? Can anybody, even a freelancer, do well in the market? And what is the best approach to take to keep your money safe?

Join us today as we break down some of our favourite tips.

Don’t Be Reckless

It can be easy, in the midst of everything the world is going through, to feel like the world is your oyster. You can expect to see panicked sales going on in waves over the next few months. This may seem like a tempting opportunity to wade in and start buying up everything you can get your hands on.

Keep in mind, however, that discretion is never a bad idea. There will still be plenty of bad deals floating around, and COVID-19 will run its course. You could find yourself dealing with the repercussions of a bad investment sooner than you might expect, so be careful.

Don’t Invest Unless You Can Maintain It for Three Years, Minimum

Considering buying stocks in response to falling prices? Consider the stability of the investments you’re sizing up. To be responsible, you have to be able to hold your investments for a minimum of three years so they have the chance to recover.

This goes for investments at any time of the year but is especially true during quarantine times.

You may want to sell. You could have any number of reasons for this.

Maybe you’re scared by all the instability. Maybe your broker recommends it. Whatever your reasoning, you should not invest during a stock market crash if you’re not ready to hold your investments for at least three years.

Stocks have a high potential return rate, but we only see those returns when we hold down, consistently, during episodes of volatility. Three years is the recommended amount of time necessary to overcome short-term market losses.

You also cannot, under any circumstances, invest money you may need in an emergency into these stocks. If you invest emergency funds and then, later on, have an emergency, you’ll need to sell to get access to that money.

Don’t Spend It All on the Markets

Cash tends to retain its value, even during a stock market crash. What this means for you, as an investor, is an opportunity to keep a portion of your investing power liquid and ready in case the market drops.

You’ll be more ready to take advantage of these dips in activity if your funds aren’t already all wrapped up in equity. Compared to other investors, strapped for cash and weighing up their options, you’ll have a distinct advantage.

Regret: It’s to Be Expected

“The best-laid plans of mice and men often go awry.”

Nobody ever gets into the stock market intending to lose money. That said, losing money, at least in the short term, is an inevitability. It’s always easier to plan when the markets are behaving as they should be.

It’s no secret that investors get nervous when the stock market is erratic. They feel regret over not getting in earlier. They feel regret at not selling sooner.

You will probably feel the same way at some point in the future. It’s inevitable, and you will almost always be left something you wish had gone differently. The worst thing you could do is sell scared.

Expert investors with years of experience don’t have perfect days. If you’re trying to take advantage of the market during COVID-19, it’s important to remember not everything will go perfectly.

Stocks will fall, sometimes repeatedly. They have done so throughout history, and have always recovered. If you are bold enough to get into the stock market during a global pandemic and impending recession, you need to be bold enough to weather the storm.

A Note on What to Invest in Now

Investing in stocks and shares is about taking a smart approach to your investments. But it’s also about investing in stocks and shares you know will make a return. With all of that said, which sectors will be most likely to pull ahead during the COVID-19 outbreak?

Healthcare and Biotechnology

The biotech and healthcare fields are expected to remain entrenched during the outbreak due to their role in treating it. Look at Quidel Corporation (QDEL) and Masimo Corporation (MASI) for mid-to-large caps. 

Teleconference

Because of its role in quarantines, teleconferencing software is also attracting purchases. It’s not a field that gets as much attention in a regular year, however, so expect some inconsistencies by way of growing pains. Citrix Systems, Inc. (CTXS) and Teledoc Health, Inc. (TDOC) have both shown promise.

Safe Shelters

The safe-haven has had its place throughout dozens of national and international disasters. They’ve seen consistent growth throughout COVID-19, with climbing dividends staving off lower prices. Campbell Soup Company (CPB) recently traded near a 52-week high, while American Water Works Company, Inc. (AWK) has come in with some great returns, as well.

Is Now a Good Time to Invest?

The world is in an interesting place, right now. One of the biggest global pandemics in recent history has sent literally everybody inside, from the man on the street to whole businesses. And, with stores, restaurants, and even some non-essential public utilities all shutting down, it can be easy to think this is a bad time to invest.

The truth is quite the opposite, though. With the market shifting to products and services relevant to the virus, we’re seeing new opportunities for investors.

It’s all about changing your perspective and learning to roll with the punches, and this is the perfect environment to do exactly that in. Some of the best long term investments come out of trying times. And COVID-19 is certainly trying.

Is now a good time to invest? It’s as good a time as it’s ever been, which means “absolutely,” provided you’re ready to put in the time and effort and invest wisely.

Looking for more choice investment insights? Check out some of our other expert blog content, today!

The Best Place to Invest 100K: Understanding UK Savings Accounts

If you have £100,000 or more in savings, keeping in safe is essential. 

The risk-free, common-sense option to keep your money safe is to put into a savings account. Not only will your money be held safely, but it will also accrue interest.

But, are your savings working well for you? Are you getting the maximum amount of interest possible?

How well do you understand UK savings accounts?

We’ll explore the different savings options and the best place to invest 100k.  

How to Find the Best Place to Invest 100k

There are several factors to consider before finding the best place to invest £100k. 

Decide how long you would like to lock your cash away. The longer you leave your money, the more interest you will accrue. 

Fixed-rate savings accounts that require you to hold your money in place over a certain amount of time can provide good returns. However, if you need your money back before then, you may not be able to access it.

Are you a pensioner or a student? Banks and building societies often offer preferential interest rates for different age groups. In which case, you should look for the best saving rates for pensioners or the best savings account for students.

You should also consider that you may need to split your money between multiple accounts

Decide on whether you need access to your cash. Do you require online banking?

Is customer service important? Will you need to service your account in your local branch? 

Work out what’s important to you, and make sure that you find an account that ticks all of the relevant boxes. 

Don’t Put All of Your Eggs in One Basket

By spreading your investments across a range of different savings accounts, you will enjoy a variety of benefits. 

If you have short-term requirements on some of your cash, put that money into an easy-access account with the best interest rates. For the rest of your cash, look for longer-term savings accounts that offer the best returns. 

Similarly, if you are unsure about what you want to do with your money, keep it in easy-access savings accounts until you have decided. That way, you can still move your money out when you have a long term plan. 

Financial Services Compensation Scheme 

When you invest any money into a UK bank or building society account, you are protected. The Financial Services Compensation Scheme protects savings of up to £85,000, or £170,000 if it is a joint account. 

If you are looking to place your £100,000 or more into any type of savings account, you will need to set up at least two different accounts with different banks to protect your money. 

Alternatively, if you can set up a joint account, you will benefit from the higher level of protection. 

The Financial Services Compensation Scheme is in place to protect your money in the event of the bank or building society being able to pay you your own money. 

Making Use of ISAs

Savings accounts in the UK are subject to tax-deductions on interest payments. 

Individual Savings Accounts (ISAs) offer the opportunity to save up to £20,000 each year, tax-free. If you have a partner, you could both invest £20,000 each in your own ISAs. 

If you want to make the most of your savings, then you should take advantage of your tax-free savings allowance by opening an ISA. 

You could opt for Cash ISA or stocks and shares ISA or a combination of both. 

A cash ISA will act in much the same way as a savings account. With a stocks and shares ISA, your money is invested into stocks, corporate, and government bonds. You may return a greater degree of interest with this type of ISA; however, you may lose money too. 

Finding the Right Savings Accounts

Find a savings account that offers you a rate of interest that is higher than the rate of inflation. 

Inflation rates directly affect the value of your savings. If you place your money into an account with a 2% interest rate, then after one year, you will have 2% more money. 

However, if the rate of inflation is greater than 2%, you will have more money, but that money will have lower purchase power than it did a year before. 

Regular Savers

Regular savers accounts often offer interest rates that are higher than the rate of inflation. 

With rates of up to 5% available, this type of savings account is certainly worth exploring. 

You will need to be aware of maximum deposit limits, as well as the length of time that the rates will be valid. 

Fixed-Rate Savings Accounts

Fixed-rate savings accounts will offer you the same rate of interest over a specified period of time. Typically, your money will be locked into the account for between one and five years. 

The longer you are willing to leave your money in this type of account, the higher the interest returns will be. 

Don’t Overlook Current Accounts

It is easy to think that a current account is just for holding your cash and paying your direct debits; however, they can be a useful tool for depositing large sums of money. 

Many current accounts will offer a reasonably high rate of interest. 

Usually, current accounts will offer a higher rate of interest for a small amount, and then a lower rate for any money thereafter. 

For example, a current account may offer 5% on the first £2,500 for one year, and then 1% on everything above that amount. 

Always Research the Best Deals

The best place to invest 100k will depend on the interest rates offered by banks and building societies. Banking products change, so shop around and find the best savings account that will work for your money. 

For more advice and information about making your money work for you, explore the other articles on the blog.