Pay Off My Mortgage or Invest? Consider These Things Before You Decide

More and more mortgage loans are getting approved by the Bank of England every year. In April 2021, 86,921 of them got approved which was an 81% increase year-over-year. 

Do you have a mortgage as well? Are you almost finished paying it off or did you remortgage it and are now deeper in debt than ever? 

A mortgage is good debt, but does that mean that you should hold off on paying off your mortgage and invest instead? This is an age-old debate in financial circles and among homeowners – ‘pay off my mortgage or invest?’  

Each individual will be different in which course they should choose. Keep reading for some factors that can help you decide. 

Pay Off Your Mortgage Quicker

If you are the kind of person who stays up at night worrying about your mortgage and the debt that you are under, then your best course of action is to pay off your mortgage quicker. There’s no need to become an anxious wreck or deteriorate your mental and physical health because you are constantly worrying about your mortgage.

Also, consider that inflation is causing interest rates to rise rapidly. If that’s a concern of yours, then paying off your mortgage early is a good way to boost your finances. 

Pros

There are many pros to paying off your mortgage quicker:

  • You become debt-free and that frees you up in a way
  • You don’t have to pay exorbitant amounts for interest payments
  • Once you pay down your mortgage you are free to use that additional income as you wish

Don’t make the mistake though of paying down your mortgage, only to use that leverage to buy some other big-ticket items, like a car or a world cruise. 

Cons

Some cons to consider when paying off your mortgage sooner:

  • There are prepayment penalties to paying off your mortgage sooner
  • You are going to miss out on all tax deductions and advantages of having a mortgage

If your mortgage is your only investment, then you are in big trouble. That’s because you are missing out on all the other potential investments you could undertake. 

Putting Your Money Into Investments

Some folks are firmly entrenched in the ‘save for retirement first‘ camp. The main reason for this? The power and magic of compound interest over time.

Pros

If you start investing when you are in your 20s, you have to invest less money over your lifetime, than someone who pays off their mortgage first and then starts investing in their 40s or 50s. 

Let’s look at the numbers. If you start saving in your 20s and invest $100 every month for 40 years, you would end up with a neat $1.17 million after.

A friend of yours who waits until their 50s to start investing, even if they invest $1000 a month for 10 years, would only have $230,000. This assumes a 12% compound rate on your investments.

But, the conclusion is quite clear. Waiting to invest can rob you of all that precious compound interest and growth time. You would have to invest more money each month if you start later and you won’t even end up with that much more despite the additional investment. 

Another big pro to investing your money starting now, rather than waiting until you pay off your mortgage is that you can take advantage of any employee matching programs that your job might offer. This is essentially free money that you can pour into your investments at no disadvantage to you. 

Cons

Not to say that there are no cons to this way of doing things. No matter if you are putting money into investments each month, your debt is still looming large over your head. 

Your mortgage is there in the background, constantly reminding you that you are in debt and your assets aren’t liquid. You can’t stop making mortgage payments, and that can put a dire strain on your finances as you try to juggle both investments and mortgage payments while trying to live a reasonable quality of life.

Some folks live an extremely frugal life because they don’t have enough income to balance both mortgage and investments at the same time. But if that’s not something that appeals to you, then this option might not be up your alley. 

Doing Both in Moderation

When you can’t figure out if one way or another works for you, then the middle way seems like the best option. Instead of pouring all your disposable income into paying off your mortgage or investing, how about you put a moderate amount into both?

This way you don’t have to sacrifice your current lifestyle for your future self. You can still enjoy an occasional meal out and a bit of travel each year. And you can splurge on big-ticket items when the need arises. 

You can make decent progress towards both goals by tamping down on your impatience and taking it slow and steady. You might not pay down your mortgage in 15 years or you might not make millions from your investment, but at least you will be able to live a balanced lifestyle while taking care of your financial future. 

Everyone reading this article is working with a different life situation. We can’t tell you which option is best for you. You would have to decide that for yourself, but the information above should make your decision easier. 

Question: Pay Off My Mortgage or Invest?

This question might seem simple, ‘pay off my mortgage or invest,’ but the answer is quite complicated indeed. Take your time and use all the information presented above to make the best judgment for yourself. 

There isn’t a ‘wrong’ answer to this question. It’s just what you are comfortable with and what risk and debt level you can handle. If you would like to read more articles on retirement to build up your knowledge base, keep browsing through our blog.

5 Signs to Watch for That It Is Time to Switch to a Different Bank

Mobile banking is estimated to be the primary method of managing money in the next two years as more high street branches close. But how do you know which is the right bank?

If you’re feeling drained by the fees, lousy customer service, and find it hard to juggle all your accounts, it might be time to switch to a different bank. 

Before you switch banks, look at these common warning signs to determine if it’s worth the hassle and will benefit your business.

5 Warning Signs That You Need a Different Bank

Most of us prefer the comfort of staying with a bank that we know instead of getting used to a new bank and all the different systems. However, moving to a different bank might save you time and money. 

Here are the five signs to watch out for that tell you it’s time to change banks. 

1. The Fees Are Too High

Fees are part of the deal when using a bank, but they shouldn’t cost you vast amounts of money. 

When you’re trying to establish a new business or running a current company, the last thing you want to deal with is increasing fees for sneaky details like international transactions, inactivity, or account maintenance. 

Even though these small costs don’t seem like much at once, over time, they will start to eat away at your annual budget and leave you with fewer expenses to invest in your business. 

So, changing banks will give you more freedom with your banking without the unfair costs of paper and other additional fees.

2. No Longer Convenient

Banks are meant to make your finances easier to manage, not harder. The reason we use banks is to be able to use our money where and when we want. 

That means you should be able to use digital banking on the go and not have to visit a local branch when you have an inquiry or want to deposit cash.

If you’re not already using digital banking, you’re wasting time. 

3. Bad Customer Service

As a business, you often have to handle large sums of money and contact your bank to arrange certain transactions, so you want to have a friendly voice on the other end of the phone. 

Often, customer service can treat you like a number, not a valued customer, making it hard to develop a working relationship with your bank.

For example, if you have to wait for a long time on the phone, your request is ignored, or you don’t have access to a real-life representative.

If you’re frustrated with the poor customer service, you need to consider changing banks. 

4. No Business Tool Features

Using a personal bank account is entirely different from a business account, so you must have certain features if your company runs smoothly. 

You should be able to access online management tools, payroll features, and credit card processing. Otherwise, you’re not getting the most out of your bank. 

Switching banks might be the only solution for better business features that will help you organise your business finances and give you time to work on other parts of your company. 

5. Lifestyle Changes 

Things can change in people’s lives; you might get a work promotion, start a new business adventure, or simply want to upgrade your bank account.

No matter the reason, your lifestyle can change, and you’ll need a different bank.

It’s always a good idea to evaluate your banking needs and assess if your current branch is giving you what you need at various stages in life. 

Tips for Picking a New Bank

Once you’ve decided that you want a new bank, you’ll have to think carefully before signing up for a new account and getting a card through the mail. Otherwise, you’ll end up moving banks again in a few months. 

Firstly, you should consider your bank account options and what’s available. 

Look at the Different Bank Account Options

In general, a few main kinds of banks are available for customers. These bank accounts are checking, savings, CD, and money market accounts. 

You should decide why you need a bank account and if you want to open several simultaneously. That way, you won’t have to communicate with several banks all the time.

If you want to control all your finances in one place, you should check that the bank offers services for mortgages, financial planning, credit cards, and investment accounts. 

Most businesses prefer to use the same bank for all their accounts as it keeps things simple and straightforward when planning your annual budget. 

Find a Low-fee Bank

Ideally, you also want to have a bank that has low fees. On average, banks will be transparent about their fees, so asking about the additional costs is essential before opening an account. 

You don’t want any surprises later on! 

Don’t Miss the Fine Print

You must always read the fine print on a website or bank documents. As a safety precaution, it’s good to examine the procedure for closures, so you know your money will be safe if the bank ever shuts down. 

Therefore, you don’t need to worry that your money is safe and can focus on growing your business

You can check out our page to stay ahead and get regular updates on the business world and economy. At CFI.co, we aim to give you the best insights from world-leading organisations that will help your business thrive. 

Move Banks and Get the Service You Deserve

Nowadays, digital banks are created every day. There is no longer a need for visiting a branch and going for regular meetings that take time out of your day. 

Switching to a different bank is necessary if you keep having trouble with customer service, there are increasing fees, and the bank no longer meets your needs. 

Thankfully, after reading this article, you know the signs to watch out for and how to find the perfect bank. 

If you need more help, visit our page and stay informed about everything business-related. 

Top 6 Ways to Save Money on Your Banking Fees

How much did you pay the last time you went to an ATM? Banking fees can be a huge source of frustration for many people. However, it’s important to note that not all banks charge the same fees, and some are more likely than others to penalise customers for using their accounts.

That said, there are ways to save money on your banking fees and some common bank fees you can avoid. By following these tips, you can ensure that you’re not wasting money when it comes time to pay your monthly bills.

Let’s dive in. 

1. Keep Your Balance High

One of the easiest ways to save money on your banking fees is to make sure you keep your balance high. This can be done by not spending money regularly, or by setting up direct deposits for automatic payments.

It’s a good idea to get in the habit of checking your account balance each month and keeping it as high as possible. This also enables you to keep an eye on bank account fees and dispute them if necessary. 

If you have a high enough cash balance, many banks will waive monthly bank account fees or other charges simply because they don’t want to lose out on potential revenue from having their customers pay those fees.

2. Get an Interest-Earning Account

Interest is a reward for lending money. Interest rates have recently risen due to the current inflation crisis. Banks pay interest on savings accounts, certificates of deposit (CDs), and some money market accounts.

The amount you earn depends on the type of account and its balance. Generally speaking, the more you have in your account, the higher your rate will be—but that’s not always true!

If a bank offers an “interest checking” account with a low minimum opening balance requirement and no monthly service fee, it can be pretty attractive. It also makes sense to link any high-balance savings or CD to your checking account.

That way, you won’t get hit with unnecessary fees if you move money between these two types of accounts too often. Equally, it won’t affect you if you exceed certain limits while making transfers between them.

3. Set Up Direct Deposits

Setting up a direct deposit option is one of the best ways to save money on banking fees.

When you receive your paycheck, most employers will allow you to have the funds deposited into a separate account. This is called direct deposit and can be set up at any bank or credit union.

When you set up direct deposit, the check must go directly into an account that isn’t attached to your debit card in any way (such as an online checking account).

Direct deposit avoids all types of checks, which means no more trips back-and-forth between work and home or worrying about lost or damaged checks that could cost you even more money in replacement fees.

If you’re a sole trader or run your own business, consider hiring a personal accountant to help you save fees and arrange your finances. 

4. Opt for Online Statements

One way to save money is by opting for online statements. Some banks will charge you if you choose paperless statements, but if you do so, they’ll often waive those fees.

Some other benefits of online banking include the fact you can stay up to date on your finances without having to go into the bank or send someone a paper statement every month

If your bank offers it, there are usually tools like bill pay and mobile check deposit available on their website as well

This gives you more opportunities for catching mistakes before they happen—like missing a payment or overdrawing an account after paying some bills—and prevents them from escalating into larger issues that could negatively impact your credit score or even lead to bounced checks and late fees

5. Don’t Use Your Debit Card for Purchases

To save money on your banking fees, you can also opt to use credit cards instead of debit cards. Credit cards have higher interest rates and thus come with more fees.

However, they do not charge debit card transactions or foreign exchange fees (which are levied when using your debit card abroad), so these additional charges can be a good deal depending on how much you use it in the first place.

6. Stay Away From ATMs That Aren’t From Your Bank or Credit Union

If you’re going to be making a lot of transactions with your debit card, it may be worthwhile to consider using an ATM that is owned by your bank. Many banks will waive their own ATM fees for customers who use their ATMs, which can save you money if you have to do a lot of ATM-related transactions.

If this isn’t an option or doesn’t work for whatever reason, credit unions are another good alternative. Credit unions tend not to charge as much in fees as large banks and are often more profitable for consumers as well because they’re smaller institutions focused on helping members rather than maximizing profits. Still, you should avoid bank fees altogether. 

If there’s one near where you live that offers lower rates and better services overall (such as low-interest rates and higher savings bonuses), then it might make sense for you to switch over from your current bank account so that you can avoid paying those extra charges every month instead!

Yet another option would be switching over to something like Bitcoin due to its lack of fees (and potential increase over time).

It Doesn’t Take a Lot of Effort to Save Money on Banking Fees 

Keep your balance high, get an interest-earning account, and shop around.  These are just a few of the ways you can save money on your banking fees.

There are many others, so don’t be afraid to ask questions and do some research when you have some spare time. 

For more stories like this, be sure to check out our finance page.

A Quick Guide to Hedge Funds

According to Preqin, hedge fund assets have reached over $4 trillion by the end of March 2021. These are investment vehicles that pool together money from different investors. Unfortunately, many people don’t understand how these funds work.

This leads to careless decisions that can result in financial ruin. If used the right way can generate higher returns than traditional investments.

For more insights on what hedge funds can do for you, continue reading to learn more.

What Are Hedge Funds?

A hedge fund combines money on behalf of certified clients. This helps maximise profits and reduce risk. To do this, hedge fund managers often use aggressive trading tactics to place wages.

This helps generate profits in both rising and declining stock market environments. These funds often have higher minimums and management costs than other investments.

Benefits of Hedge Funds

Hedge funds can reduce their exposure to broader market moves by 50 per cent. That is why any market change doesn’t phase them.

Yet, they are still known for being high-risk investment options.

The positive side is that these funds have many benefits, such as: 

High-Visibility Portfolio

Hedge funds can enhance your portfolio by investing your wealth in lucrative assets. Their high-profile portfolio reflects an individual’s investment prospects and choices. It also reveals the derivatives, equities, real estate, and much more.

Adds Flavor to Your Portfolio

Mutual funds engage in cautious and conventional investment strategies. Hedge funds aim to explore the financial world by investing large cash in unique assets. Hedge fund managers can help diversify and invest your funds in the optimal asset.

Unaffected by Market Volatility

Hedge funds rely less on fixed income markets and more on profit-generating assets. That means market swings don’t affect them as much as traditional investment options. Thus, their capitals are less susceptible to volatility.

What Are the Risks of Hedge Funds?

If you’re thinking about investing in hedge funds, you should be aware of the risks.

Here are some key problems to consider:

High Pricing Structure

Hedge funds charge both a management and a performance fee. The average yearly management charge is between 1 and 2 per cent.

Most funds levy performance fees ranging from 15 to 20 per cent of the fund’s annual earnings. The stronger the fund’s performance, the bigger the investor’s cost ratio.

Insufficient liquidity

In some instances, hedge funds use lockups, withdrawal gates, and side pockets. This is to limit or ban investors from withdrawing capital.

This occurs if there is a discrepancy between the liquidity supplied to customers. It also takes into account the liquidity of a portfolio’s underlying assets.

Complicated Tax Filing

A taxable account may be liable to short-term or long-term capital gains taxes. Hedge fund investors get a Form K-1 with tax reporting information every year.

These documents are often unavailable before the April 15 reporting date. This will require investors to get an extension.

What Is a Hedge Fund Manager?

These managers make daily investment choices for the investors. They decide how to distribute funds and control their risks. They get a performance fee of up to 20% of the fund’s revenues if it’s profitable.

Before hiring one, ask for the Form ADV. This provides access to their disciplinary history, fees, and investing strategy. You can find this form in the Investment Adviser Public Disclosure database.

Choosing From Several Hedge Fund Strategies

Search for hedge funds with a proven track record. Check out their performance and risk management. See if it meets your individual investing goals; you can also check out these strategies for help:

Equities Hedging

You can buy inexpensive equities (long positions) and sell overpriced companies (short positions). These funds can reduce volatility to their benchmark index by hedging their holdings. It can also minimise the risk to major stock market indexes, like S&P 500.

Short or Long Credit

The majority of the return comes from coupon payments provided by the bonds. The rest originates from capital appreciation (long positions) or depreciation (short positions). This results from the changes in the credit quality of the bonds.

These funds invest in different grades, maturities, and forms of collateralisation. It can also incorporate all levels of a company’s capital structure. This is to support its operations and expansion.

Event-Driven

Hedge funds can take positions based on an event to enhance a firm’s stock or bond price. These may include the following:

  • Merging of two firms
  • Separation of a subsidiary unit
  • Restructuring of a company’s capital structure

The goal is to improve its financial position. The occurrence, referred to as a “unique scenario,” is crucial in deciding the stock or bond’s value.

Relative Value

This technique seeks to capitalise on price disparities across connected financial products. They have less exposure to the equity and bond markets than equity hedges. These funds concentrate on distressed debt, sovereign bonds, high yield, and investment-grade bonds.

Global Macro

Funds with the widest investments can opt for all asset classes and markets. Managers check the global economic environment.

They strive to reap benefits from the macroeconomic and geopolitical imbalances or dislocations. During market volatility, these funds can deliver an excellent ROI.

Trading Future and Forward Contract

The purpose of these contracts is to generate a return without using the stock and bond markets. Rather than depending on the fund manager, you will use computer-based algorithms. The algorithms seek to discover market trends for each commodity.

It takes positions depending on the anticipated direction of commodity prices. Managed futures are among the most liquid of all available hedge funds to investors.

Hedge Fund Fees and Minimums

Initial investment minimums for hedge funds vary between $100,000 and $2 million. It may only permit withdrawals after a specific time of the year.

It charges an asset management fee of 1 to 2 per cent of the amount invested. It also sets a performance fee of 20 per cent of the fund’s profit. These expenses might reduce your total return.

 

Insights on Investing in Hedge Funds

So there you have it, fantastic information about hedge funds, their benefits, and risks. If you invest wisely, it could be a great way to generate passive income. Reckless investments can destroy your financial future.

Remember, these investments are not affected by the market’s volatility. Plus, it helps diversify and add transparency to your portfolio. If you want to reap the benefits, contact us for more information about hedge funds.

Business Startup Loans: How to Finance Your New Business

Only 48% of small businesses in the US have the financing they need to operate. This may be because they don’t know the business startup loans available to help fund the company. 

So, what is a business startup loan? And what types are there? Keep reading to learn more about how to fund your startup. 

Before Applying For a Business Startup Loan: 

Before you apply for a business loan, you need to know what you’re going after. How much can your company afford to pay back? How much do you need to get started? 

You should also consider your business credit score. A low score will mean you are less likely to get the loan. Read more about each: 

Determine How Much You Need and How Much You Can Afford

Entrepreneurs need to understand their own financial needs before applying for a business loan. This is because it helps them determine if they can actually afford the money. It also ensures they are aware of all of their expenses.

Many people think that they can just apply for a business loan and get funded. They don’t consider the amount of money they need or what kind of interest rates they will be on their loans. This is not true and it can lead to financial disaster in the long run.

Get a Good Business Credit Score 

A business credit score is a key factor in determining whether you are eligible for a loan or not. It is important to have a good business credit score before applying for a loan.

You must know how to get a good business credit score before applying for a loan. There are various ways that you can do it. Those include using your personal credit cards responsibly. paying your bills on time.

It also helps to keep your business current with taxes and other fees if you are operating. A business with a good credit score is more likely to get approved for a loan than one with a low credit score.

A good credit score can help you get approved for loans more easily and in fewer steps. It also helps you avoid unnecessary fees and interest rates of loans.

Types of Business Startup Loans to Apply For 

When you apply for a small business loan, you have a lot of options. The following three are the most common loans: 

SBA Loans

The SBA is a government agency that offers loans to small businesses. They give out loans to applicants who are in the early stages of their business and don’t have enough collateral to secure a bank loan.

The SBA provides startup loans to assist with the costs of starting or expanding a business. These loans are for entrepreneurs who have not been able to secure other financing options. 

It is a business loan guaranteed by the U.S. Small Business Administration (SBA). The money can be used for a variety of purposes including equipment and inventory. You can also use it for buying land, buildings, and construction.

Personal Business Loans

Personal business loans are a great way for startups to get started. They allow entrepreneurs to access capital without having to go through securing venture capital and other forms of loans.

There are two types of personal business loans: secured and unsecured. A secured loan requires collateral like property or equipment. If the loan is not repaid in full in time or if there is a default on the loan agreement, the property will be seized. Unsecured loans do not require collateral and can be repaid in any form

Microloans 

A microloan is a small loan taken out by people with a low credit score and bad credit history. They are usually given to new entrepreneurs and small businesses.

Microloans are an easy way to raise capital for startups. However, they come with some restrictions. 

Microloans are often given in the form of grants or interest-free loans for up to 12 months. But if you plan on taking out any other loans from the same lender, you will have to pay back both microloans at once.

How to Fund Your Business If You Can’t Get a Loan 

Some startups just can’t get a business loan and struggle with funding. There are a few options you can try to fund your business: 

Ask Friends and Family

Most people don’t know how to ask their friends and family to help fund their startup business. It can be a nerve-wracking experience, especially when you are just starting.

We recommend that you use these three tips:

  • 1Be specific about your goals and what you will do with the money
  • Give people a chance to contribute
  • Keep it short and simple

You mustn’t pressure anyone to feel like they have to help. Asking never hurt, but prepare for a no and to move on. 

Crowdfunding

Crowdfunding is a form of funding that allows you to raise money from a large number of people to finance your project. It is a way for anyone with an idea, product, or service to raise funds from the public.

Crowdfunding can fund all types of projects, including those related to startups and small businesses.

Grants

Grants are a great way to fund your business without having to pay for it. They are usually offered by governments or non-profit organizations in the form of money.

There are many types of grants available for entrepreneurs. These include government grants, business grants, and angel investments. Once you find out which one is best for your startup, apply for it!

Learn More About Startup Finances 

This article covered business startup loans and your options as a business owner. We hope you have a deeper understanding of how to fund your startup. 

At CFI, we have expertise in many areas of finances. Whether you need help with startup funding or investment strategies, we have articles to cover each topic. 

Are you interested in learning more? Check out our finance blog

Bitcoin for Beginners: Everything You Need to Know

More than 106 million people worldwide use cryptocurrencies. Despite the rapid adoption of cryptocurrencies in recent years, many people still have very little understanding of them. Of all the cryptos we now have, Bitcoin is still the most popular, so if you want to get into crypto, Bitcoin is where you should start.

So what is Bitcoin, and why has it become so big? This Bitcoin guide covers what Bitcoin is for beginners and will get you started in the world of crypto.

Bitcoin for Beginners

Bitcoin is a digital currency that was invented in 2009. At the time it had a value of less than 1 cent per coin and has since seen all-time highs of almost $70,000. Bitcoin is traded using blockchain technology, where everything happens through a decentralized ledger. This means that no government or financial institution can control it in any way.

All transactions on a blockchain are recorded, and anyone can view the information. Bitcoin is secured with cryptography, which involves complicated algorithms to validate transactions.

Because there’s no central authority that controls Bitcoin, users can create accounts without making their identities public. You can make transactions without having to worry about anyone tracing them back to you.

The History of Bitcoin

Perhaps one of the most interesting things about Bitcoin is its origin. Despite all the things known about it, the actual creator remains a mystery.

When it was released in 2009, credit for the creation of Bitcoin was given to Satoshi Nakamoto. This, however, is not a real person, and the creator’s actual identity remains unknown to this day. There’s even speculation that “Satoshi Nakamoto” is a group of people rather than an individual.

One of the details specified in Bitcoin’s whitepaper is that the purpose of Bitcoin is to serve as a “peer-to-peer electronic cash system” independent of any central authority. Many people believe that this is a direct response to the financial crisis of 2008 so that regular people don’t risk suffering as a result of the greed of financial authorities and large banks.

Since Bitcoin’s creation, thousands of other cryptocurrencies have been invented with varying levels of success. Some have become very popular and valuable, but Bitcoin still stands at the top.

How to Buy Bitcoin

If you’re interested in buying Bitcoin, there are a few ways you can do this. The most common method people use is a crypto exchange.

There are several large exchanges available such as Coinbase, Binance, and Kucoin. For the most part, these are all relatively similar, but they do vary in terms of the cryptos they sell, the fees they charge, and certain smaller features. Take a look at some different exchanges so that you can decide which one is best for you.

Once you’ve settled on an exchange you need to create an account. Depending on the one you’ve chosen, you might need to provide ID for verification before you can start trading. You can add a payment method, with the easiest being a debit/credit card, but wire transfers and some other methods are also possible.

You can then start buying your crypto. You’ll have the option to buy Bitcoin or a range of other cryptocurrencies. Bear in mind that there will be a fee for every transaction, so look at the payment details on each purchase to see how much it is.

Remember that the value of any crypto goes up and down, so buying at different times will affect how much Bitcoin you get, even if the transactions are just minutes apart.

Selling Bitcoin

If you decide to sell any Bitcoin you own it works similarly, but you choose what to sell it for. You can sell it for a fiat currency (dollars, euros, etc.), different cryptos, or stablecoins. Again, like when you’re buying Bitcoin, the price will change with each transaction.

Stablecoins are useful if you want to hold your finances on the blockchain, but not as crypto. Stable coins are pegged to the US dollar, so unlike Bitcoin, the price doesn’t change, and they will always be worth the same dollar amount.

Storing Bitcoin

When you buy crypto it will be held in your account on the exchange you’ve used. You can keep it here, but most people prefer to transfer it to an external wallet for security purposes.

Soft Wallet

A soft wallet (or hot wallet) is a digital wallet that you can usually use as a browser extension or a smartphone app. They’re free and more secure than exchanges.

When you set up a soft wallet it will give you a 12-24 word seed phrase. If you ever lose access to your wallet you’ll need your seed phrase to get it back, so make sure you make a note of it and store it securely.

You shouldn’t save a seed phrase to your computer or anywhere else someone might be able to access it. If someone gets your seed phrase they may be able to steal all of the crypto in your wallet.

Cold Wallet

A cold wallet (or hard wallet) is a physical device that you can store crypto on. Like a soft wallet, these use a seed phrase, but they also have to be connected to a computer physically for any transaction to take place.

When it comes to strong Bitcoin, this is the most secure option. A hard wallet isn’t essential for everyone, but if you have a large amount of crypto then it’s generally a good idea to have one.

The Future of Bitcoin

As more people and organizations are adopting Bitcoin, it seems that it will only grow from here. Various retailers already accept crypto, and there are even Bitcoin ATMs all across the US. CFI.CO covers all things finance, helping you stay up to date with the latest information.

For more about Bitcoin for beginners, click here to visit our website and sign up for our newsletter.

What Do Increased Interest Rates Mean for Your Wealth?

Congratulations, you’re a grown-up!

That means that your money is doing more than just sitting in a savings account. You’ve got an IRA and you’re investing in real estate. Heck, you might even have some stocks or bonds.

As a savvy and forward-thinking person, you are already aware that interest rates are the price of borrowing money. These rates affect everything from auto loans to mortgages. When there are increased interest rates, lenders make more money on each loan.

But what does all this mean for your wealth?

We’re going to dig into this question to see how recent increases in interest rates might affect your current and future expenses. Keep reading to get the scoop.

The Federal Reserve Bank and the Overall Economy

The Federal Reserve Bank is a private bank that works independently of the federal government. It’s responsible for setting interest rates and regulating the banking system. When there are economic problems, they can lower or raise interest rates to help stimulate growth in the economy.

In May 2022, federal interest rates rose by half a percentage to 0.75% – 1%. This may increase to around 3% by the end of this year if we stay on track with our current economic situation and the inflation rate continues to rise as predicted.

Your Existing Loans

It is important to know how the new interest rates will affect your monthly payments if you already have a loan. If you have a fixed-rate mortgage, for example, there won’t be much of an impact on your debt since it does not change based on market conditions. However, if you have a variable-rate mortgage or student loans, higher interest rates could mean that your payment amount will increase and become more difficult to handle.

To avoid any surprises in the future, consider refinancing at a lower rate now while they’re still available. This can help reduce the cost of borrowing and improve overall savings. Plus, if there are other options available, like shorter terms or even no prepayment penalties, refinancing may be well worth it!

Credit Card Debt

If you have credit card debt, your interest rate is likely to increase because of the Federal Reserve’s rate hike. This is because credit cards are based on the prime rate, which moves in tandem with the federal funds rate.

If you have outstanding balances on multiple credit cards with different rates, consider merging them into one debt with a fixed interest rate that better matches what you pay now. That way, your payments will remain stable whenever your current card adjusts its rates.

The Housing Market

The housing market is one of the biggest economic drivers, so it’s no surprise that any changes to this sector would impact your wealth.

When interest rates increase, it becomes more affordable for you to buy a new home. On the flip side, renting may become more expensive as landlords pass along their rising expenses by raising rents (or evicting tenants).

Increased Interest Rates and the Stock Market

When the Federal Reserve Bank raises interest rates, it can have a positive impact on bank stocks. In fact, when the Fed raised interest rates in December 2018, bank stocks performed very well. Reason: When the Fed raises interest rates, savings accounts can earn more money and people are likely to use banks more often.

The stock market as a whole does not react favourably to rising hikes from the Federal Reserve Bank though. Instead, it goes down because of inflation eroding away at investors’ returns.

There’s no guarantee how your investment portfolio will move if interest rates go up. However, it is good practice that you regularly rebalance your portfolio so that any potential losses remain minimal.

Bonds and Other Fixed Investments

When you invest in bonds, you are lending money to the issuer of the bond. The issuer pays a fixed rate of interest on this loan (known as “coupon payments”), which is paid at regular intervals (usually monthly). Most bond issuers are corporations and governments, although they can also be other entities, such as mutual funds.

When interest rates rise, the price of bonds decreases to attract investors. Issuers might even be forced to reduce the interest rate they pay out in order to attract investors.

Personal Spending

It’s not uncommon for people to panic when they hear the word “interest rate hike.” But it’s important to remember that interest rates affect all sectors of the economy. While they might have a negative impact in some areas, there are others where higher rates can be beneficial.

Some people may choose to spend less when interest rates are high, but this could also be a good time to invest in certain areas. For example, if you’re thinking of buying a home, a higher interest rate may mean that you’ll have to pay less each month for your mortgage. It will also likely mean that the value of your home, along with other investments you make during this time, could appreciate at a faster-than-average rate.

Wealth management during this period of inflation can be difficult, but if done correctly, it can lead to financial stability.

Protect Your Wealth in Any Economy

As you can see, increased interest rates have a lot of implications for consumers. But don’t worry—by paying attention to these trends and making smart decisions about where to invest your money, you can still work to grow your wealth.

With careful planning and a clear idea about your spending habits, you can take control of your money situation. Check out our other blogs to learn more about how to protect your assets during periods of economic instability.

Sports sponsorships by crypto apps skyrocket in the past year

The sports sector has become the ideal target for some of the best crypto apps seeking growth. Some of the largest players in the cryptocurrency sector have announced strategic deals with sports clubs, leagues and organizations to attract new audiences. 

crypto

Best crypto apps scramble for sports partnerships 

The crypto space has grown significantly over the past year, and sports franchises have been open to securing deals in the world of cryptocurrencies. Some of the most reputable athletes have also pocketed deals, such as being brand ambassadors of some crypto projects or accepting their salaries in crypto assets. 

Last year, some of the largest crypto sports sponsorships were recorded. The sponsorship deals were worth around $1.2 billion in total. One of the greatest sports deals secured last year was by Crypto.com. The exchange acquired naming rights for the Staples Center in Los Angeles for $700 million. They also spent another $210M in a major deal with UFC.  

However, Crypto.com is not the only crypto app tapping into sports deals. FTX has also secured several major deals, including the naming rights to the Miami Heat arena last year. FTX also invested $210M for a sponsorship deal with TSM. 

Other top exchanges like Binance and Coinbase are also investing in the space. Binance, the world’s largest exchange by trading volumes, was the major partner for the Africa Cup of Nations (AFCON) tournament. Coinbase is also the cryptocurrency exchange for the NBA. 

Regarding the number of sports sponsorship deals secured, eToro stands out, having secured 36 sports deals with football teams based in Europe. 

Football attracts more deals 

The crypto industry is yearning to attract sports enthusiasts by marketing during major competitions. For instance, Super Bowl, the most televised sports event in the US with an over 90 million audience, attracted advertisements from leading crypto exchanges. 

Football has attracted more sports deals than any other sport. At least 56 sports partnerships have been with football clubs, tournaments and players. Football is one of the most-watched sports globally, and it makes sense that crypto apps are focusing most of their attention here.  

However, partnerships with football clubs have also attracted attention from regulators. For instance, Arsenal was banned from promoting its fan tokens last year. Liverpool fans also criticized the club’s decision to release a non-fungible token (NFT) collection. 

Sports players are also venturing into crypto 

Sports players are also entering the crypto space. Odell Beckham Jr, an NFL star, became among the first marquee sports players to receive a salary in Bitcoin. Around 8 NFL players accept part or all of their salaries in digital currencies. 

After signing for the Jacksonville Jaguars last year, Trevor Lawrence agreed to take a huge share of his $24M signing bonus in several digital currencies, including Bitcoin (BTC), Ethereum (ETH) and Solana (SOL). 

Bitcoin has particularly become the top option chosen by players who want to receive their wages in digital currencies. However, fan tokens are also becoming a favourite, with Lionel Messi accepting PSG fan tokens after joining the French club last year. 

Investment Banking for Beginners: What You Need to Know

Did you know that the average investment banker makes more than eighty thousand dollars a year? And that’s before any bonuses that they receive.

Not only is it possible to make a big difference in the world as an investment banker, but you can also make a lot of money. Unfortunately, many people choose not to pursue these types of careers because they don’t understand what is investment banking. 

To help you make sense of what it’s all about, we’ve created this guide. If you want to learn more, read on and we’ll tell you what’s important to know. 

What Investment Banks Do

Most people have no idea what investment bankers do. They know that it’s an important career, but they aren’t certain why this is. 

It’s incorrect to think that investment banking is all about greedy people in business suits who think about nothing else except their next investment opportunity. This is because more and more people are choosing to take ownership of their own financial futures by making investments in assets that will increase in value. 

In most situations, this involves developing relationships with investment bankers. While traditional banks mainly take deposits and lend money to people and companies, investment banks sell securities. 

It’s common for investment banks to invest the profits from these securities into big projects that traditional banks might consider to be too much of a risk. Here are some of the most common kinds of projects that investment banks tend to get involved in. 

Offering Finances for Big Projects

Many investment banks invest their money in large infrastructure projects such as building roads and bridges. These kinds of projects need huge amounts of money to complete. Investment banks invest money into these projects with the belief that they will generate revenue once they’re completed. 

Investing in Companies

It’s common for young companies to seek help from investors. Even though many company owners invest their own money to start their companies, this isn’t usually enough. This is why they often choose to create an initial public offering (IPO).

The basic idea behind an IPO is for a business to sell itself to the public. It’s the job of investment bankers to find investors who want to buy securities from these companies. 

Mergers or Aquisitions

When it’s in a certain company’s interest to acquire or merge with another company, they seek help from investment bankers to seal the deal. Investment bankers often provide companies with the financing they need to acquire or merge with other companies. 

Managing Assets and Offering Brokerage Services

One of the fundamental goals of investment bankers is to make investments in areas where it’s likely to bring returns. They often do this by acquiring clients who trust their investment bankers to manage their money. Investment bankers do this by choosing individual stocks or by finding mutual funds. 

The Demographics of Investment Banking

Just like other forms of banking, the investment banking industry is dominated by white men. Less than twenty per cent of members of boards of directors are minorities. Less than thirty per cent are women. 

Most people who work as investment bankers know that this is an issue. This is why it’s becoming more common for banks to create diversity programs. The aim of these programs is to seek-out qualified women and minorities to work for their companies. 

How to Get Your Start as an Investment Banker

Since it’s important for investment bankers to know how to make deals, they need to know how to sell themselves. This means that you need to know how to convince people to hire you if you want to become an investment banker. 

At the very least, it’s essential that you have a bachelor’s degree in business or economics from a respected school. Most investment bankers also have advanced degrees in business and mathematics. 

It’s also important to be a good networker if you want to become an investment banker. Most people get started by becoming interns at reputable firms. 

What Are the Best Investment Banks?

The biggest investment banks are JPMorgan, Barclays Bank plc, Goldman Sachs, Citigroup, Morgan Stanley, Deutsche Bank, and UBS. There are also hundreds of smaller investment banks that do business in countries around the world. 

Most of the largest investment banks generate revenues of more than a billion dollars. Clients of the largest investment banks include retail companies, hedge fund managers, and governments. People with pension funds or who have investments also indirectly do business with investment banks. 

The Difference Between Investment Banks and Retail Banks

Retail banks usually work with individuals by taking in their deposits. In exchange for putting your money into a bank, these people accrue interest on their savings. Retail banks also lend money to people who need to do things such as buy a new house. 

Investment banks work mainly with large companies that need lots of capital. If you run a start-up or a small business, chances are that you’ll do business with commercial banks rather than with investment banks. 

In most situations, investment banks do not do business with individual clients. They are more likely to invest in large companies and projects. 

What Is Investment Banking: A Multi-Billion Dollar Industry

If you’ve been wondering “what is investment banking?” it’s important to understand how different investment banks are from retail banks. While most retail banks do business with individual clients, the majority of investment banks invest in large projects and corporations.

If you found this article helpful, don’t forget to check out the other informative articles that we’ve included in our Banking dropdown. Regardless of whether you own a business or are an individual investor, we have many helpful resources. 

What Is Digital Banking?

There are now 14 million people in the UK who have a digital-only bank account. 76% of citizens have also used an online banking service in the last 12 months. But, do you know what these services are?

Both digital and online banking have some major differences. Read on as we answer the question “What is digital banking?”

What Is a Digital Bank?

A digital bank is a financial institution that has all of its operations online. Services that were previously available at physical branches can be undertaken in browsers, mobile applications and digital environments.

They do not have brick-and-mortar premises but exist solely through digital means. 

What Is Digital Banking?

Digital banking involves transforming all activities, processes and banking products into digital transactions. This allows them to be done anywhere with internet access, making banking much easier for the consumer. Most services are 24 hours and do not require a staff member to be present in a bank.

  • Obtaining Records and Statements
  • Transferring Funds
  • Withdrawing Cash
  • Bill Payments
  • Account Management
  • Monitoring of Transactions

There are also many advantages for the bank itself. As many processes can be automated, it reduces human error and the labour required for repetitive tasks. 

What Is the Difference Between Digital and Online Banking?

These two terms may seem interchangeable. However, there are two key differences between them. 

Online banking works through internet access. It has several basic banking products and functions. However, the system has limitations and it can not expand to add further services to consumers.

You would find this in use with traditional institutions that have added internet banking as an additional service. It works alongside their other operations. 

Digital banking is more in-depth and flexible. It has API, automation and web-based service at its core. This means it can provide more security and cost-efficiency.

A digital bank exists solely online. You don’t have branches you can walk into to make deposits and consult staff face to face.

If you want the ability to expand and add extra features, then digital banking is key. Metrics and analytics taken from it can help improve the customer journey. 

There is a third option: Mobile Banking. This is when banks create a designated application so that customers can perform services on their mobile devices.  

Benefits of Digital Banking

Digital banking has several benefits. It is changing at a rapid rate bringing advantages for consumers, business owners and the banks themselves.

Increased Accessibility

Digital banking means residential customers, businesses and their employees can access banking anytime. All they need is a device and internet access. They can approve expenses, make purchases and transfer balances. 

This can take place anywhere. It may be in the office, on a commute or on a business trip. With the addition of mobile banking, it becomes even easier. 

Improved Customer Experience

A well designed digital banking system also creates a better user experience. Chatbots are often available to assist customers with any problems or queries. This improves customer service while minimizing the workload of staff in the bank themselves.

Not only can tasks like scheduled bill payments be set up, but tools for financial management are also provided. Statistics on spending and saving along with financial planning are available. 

Central Account Management

With digital banking, all departments can be accessed from one location. This means you don’t have to deal with different representatives. With mobile banking, you can even download multiple apps to represent your different accounts. 

Lower Costs

Fully digital banks operate with lower overheads as they have less staff and no physical premises to operate from. They can offer higher yields on savings, lower interest rates on loans and reduced fees as a result. This is often done to attract customers who may normally get put off by the absence of a physical store. 

Benefits to Employees

From small businesses to large corporations, digital banking can provide a huge opportunity for employees. With digital banking for businesses, you can assign several corporate cards to employees who may need access to faster means of purchasing to do their job. 

With real-time metrics and analytics monitoring, business spending also becomes easier. Reviewing spending by category and approving purchases or expenses instantly is an advantage. Policies can be created and individual thresholds set for individual employees on spending. 

By providing financial autonomy, you empower your individuals. At the same time, you also retain control over the finances of the business. 

Limits of Digital Banking

While it has many advantages, digital banking should be viewed as a bridge. It can never replace the interaction you get at a branch and some transactions, such as deposits of cash and withdrawals, can not be performed. 

To get around this, digital banks usually allow cash deposits in designated partner retail outlets. However, this can often incur a larger fee. 

Future of Digital Banking

Digital banking provides flexibility, but customer needs are bound to change. This means a modular infrastructure needs to change with them. What works now may not do in one or two years.

Many banks are now starting to adapt and incorporate digital asset transactions and management into their infrastructure. This includes digital payment wallets and transfers. All of this is provided alongside the standard services for fiat currencies that people need. 

Starting with Digital Banking

Now you can answer the question “What is digital banking?”, you just need to find the services that fit your needs. Not all banks will have the same offers. Make sure you look to see what you need and who can make the best provisions. 

If you found this article helpful, CFI.CO blog has many more to help. From banking to finance, we can get the most from your money. Click here to see all our business articles and let us help your business boom in the coming year.