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.

Smoking Gun

Don’t follow the leader. Also, please don’t smoke. The leader self-medicates whilst smokers die early. That may be true but with a caveat unearthed by scientists: the novel corona virus seems to dislike nicotine and apparently shies away from smokers. Medical authorities in China, France, the United Kingdom, the United States, and elsewhere discovered that smokers are seriously underrepresented in the pandemic’s statistics.

Crunching the numbers, it would appear that nicotine junkies are half as likely to become infected as those who quit or never took up the habit. In one study conducted by the Centers for Disease Control and Prevention (CDCs) in the US, a random sample of some 7,000 covid-19 patients turned up only about 70 smokers (1%). An estimated 14 percent of the US population has yet to kick to habit, indicating that lighting up seems to offer some form of immunity.

There is also a bout of bad news: should a smoker become infected, he or she is more likely than others to end up in intensive care and succumb to the disease.

Puzzled by their findings, scientists are looking for an explanation to this politically incorrect phenomenon. The University of Oxford got involved and its scientists now suspect that nicotine may disturb the proper functioning of the integral proteins that dwell on the cell membrane. These ‘transporter’ proteins are the vehicle of choice used by the corona virus to penetrate cells.

French scientists of the renowned Pasteur Institute hypothesise that the novel virus is locked in a competition with nicotine for the use of these transporter proteins. Following this line of reasoning, they now want to study if the use of nicotine patches may help prevent infection and/or speed up a patient’s recovery.

Expect President Donald Trump to take up smoking before long. He is already taking hydroxychloroquine against the advice of his White House physicians. The drug, originally intended for the treatment of malaria, has dangerous and possibly lethal side effects when administered without close medical supervision. Evidence of its effectiveness in fighting the corona virus has been inconclusive. Recent studies have found no indication that it helps bolster the immune system.

That doesn’t bother President Trump at all. He is a risk taker and admits to taking hydroxychloroquine in an attempt to prevent infection. He is determined to be the last man standing. Mr Trump also refuses to wear a facemask as it would detract from his presidential aura. As if.

Pound could drop even further – to $1.18 – in June: deVere CEO

The pound – this month’s worst-performing major currency – could “easily drop to $1.18” at the end of June, warns the CEO of one of the world’s largest independent financial advisory and fintech organisations.

The warnings from deVere Group’s chief executive and founder Nigel Green come as it is revealed that the British currency shed almost 4% against the U.S. dollar in May and 3% against the euro.

Mr Green comments: “The pound is this year’s third-weakest major currency – just behind the New Zealand dollar and Norwegian krone, which have done even worse.

“The pound has been battered since the Brexit referendum in 2016 and the ensuing years of political uncertainty, losing around 20% of its value since the referendum. 

“The Covid-19 crisis has been another hammer blow for sterling as it promoted a flight-to-safety and ramped-up the search for liquidity.  This situation is a win for the U.S. dollar and, in turn, a loss for the pound.”

He continues: “There are legitimate concerns that the pound has further to fall in the next few weeks.

“It could easily drop to $1.17-$1.18 by the end of June due to renewed and heightened fears of a negative shock due to a no-deal Brexit combined with the far-reaching economic fallout of the pandemic.”

Negotiations between the UK and the EU on their post-Brexit future relationship stalled on Friday with the EU’s chief negotiator Michel Barnier saying the two sides risked reaching a “stalemate.”

The British Prime Minister Boris Johnson has repeatedly threatened to walk away from the talks if insufficient progress has been made by next month’s high-level negotiations. The UK has indicated the alternative of an “Australia-style” deal, a relationship where both sides trade on basic World Trade Organization terms, similar to a no-deal Brexit.

“An even weaker pound will help to reduce people’s purchasing power and a drop in UK living standards. Weaker sterling means imports are more expensive, with rising costs being passed on to consumers,” says Mr Green.
 
“The fall in the pound is good for exports some claim, but it must be remembered that around 50% of UK exports rely on imported components. These will become more expensive as the pound falls in value.
 
“A low pound is, of course, bad news for British expats, amongst others, who receive income or pensions in sterling.
 
“The country’s financial services sector – which represents 6% of all economic activity – will also be adversely affected because it is built on foreign investment that puts its faith in sterling being strong.”

The deVere CEO concludes: “The pound will remain volatile, and is likely to become weaker in the next month.
 
“As such, it can be expected that domestic and international investors in UK assets will be seeking the available international options available to them.”

Bungling

Republican Alaska state representative has apologised for likening the curbs on civic freedoms adopted in the fight against the corona virus to the treatment of Jewish people in Nazi Germany. Only after a firestorm erupted amongst his peers in the state capitol and elsewhere did Representative Ben Carpenter see the error of his ways. Mr Carpenter now says he is sorry.

Passions flare regularly in the United States where the political landscape has become so polarised that bipartisan cooperation is now almost considered an act of ideological treason. Yet, some Republicans have coalesced into an informal grouping that seeks to wrestle control of the Grand Old Party away from fellow party members and representatives who are beholden to, if nor transfixed by, President Donald Trump. Sensing that the electorate could well swing to the Democrats, they try to distance themselves and their party from the president and his accident-prone administration.

In the House, a slowly growing number of Republicans are reaching out across to aisle in order to improve their own standing and show voters that they have acted sensibly. In competitive districts, Republicans representatives are keenly aware that it takes just a few disgruntled voters to eject them from Washington.

Though major news outlets focus on gun-toting mobs of libertarians angrily voicing their disagreement with stay-in-place orders, most ordinary Americans seem unhappy with the chequered performance of President Trump whose approval rating has plummeted to barely 42 percent. The president may expect stronger headwinds going into the campaign after the undoubtedly depressing economic data of the second quarter start trickling in.

The president has, of late, turned up the rhetoric and promises to deliver a splendid 2021. He now wants voters to ignore the Corona Recession that pushed the US unemployment to a depression-era level in a few weeks’ time. President Trump is busily looking for scapegoats as well. After first blaming China, he now points to state governors as the main culprits of the economic slump. His predecessor also gets apportioned a generous share of the blame. The president’s own performance has, of course, been nothing less than great and visionary.

There are few things more damning to the legacy of a US president than being ejected from the White House after a single term in office. Jimmy Carter never quite recovered from the experience. He was done in by a major economic crisis that came with an inflation rate of 20 percent. Reaching farther back in time, Herbert Hoover (1929-1933) also disappeared under a dark cloud for his monumental mishandling of the Great Depression.

There is a precedent or two to be found for presidents failing to secure a second term after bungling the federal response to a major crisis.

Chasing a Mirage

Swedes are a remarkably compliant people. Civil disobedience as an expression of individuality is collectively frowned upon whilst strict adherence to official instructions and suggestions is celebrated as the defining component of ‘lagom’, a supposedly untranslatable word that indicates both an acceptance of rules and convention and a passionate desire to not stick out from the crowd.

Thanks to the Swedes’ adoration of all things lagom, the government in Stockholm saw no need to order a lockdown. A mere suggestion to observe a social distance sufficed. Not normally a people relishing in close bodily contact, the Swedes complied with a suspicious eagerness that seemed to confirm all stereotypes.

Hailing from afar, the corona virus did not care for any other local trait or custom. Happily going about their business as usual, and in the process becoming President Trump’s favourite socialist country, quirky Swedes took great pride in their exceptionalism.

The country’s medical authorities continue to focus on establishing herd immunity as the only viable strategy to defeat the virus, absent a vaccine. Though no other European nation seems better equipped for herding than the Swedish, collective immunity remains a distant mirage. Just in the greater Stockholm area, the number of people infected by the virus needs to multiply by a factor of ten before herd immunity becomes a possibility. The virus must, of course, not mutate and spoil the effort.

Meanwhile the death toll keeps rising. Last month, 27 percent more people died in Sweden than might have been expected based on statistical averages. In neighbouring Finland and Norway, countries not burdened by lagom, there has been no spike at all in death rates. In Denmark, excess deaths amounted to 5 percent. By comparison, the UK in April reported a 67 percent spike in the country’s death rate.

There is no reason why Sweden should suffer more than its neighbours: the country’s population is relatively healthy and boasts an exceptionally high number of single person households. Only the government’s refusal to order a lockdown sets Sweden apart. It would seem that, perhaps, the Swedes have been a little bit less compliant than anticipated, allowing the virus to rip through its society opposed only by a probably fictitious national trait.

Winter Is Coming

Listening to Dr Rick Bright testify before US Congress and reveal the inner workings of the Trump Administration almost undermines one’s trust in politicians and their carefully selected appointees. In 2016, the good doctor was asked to lead the Biomedical Advanced Research and Development Authority, a federal agency charged with the production and procurement of vaccines. On 21 April he suddenly resigned his post.

It now appears that Dr Bright was ousted for opposing the promotion of two potentially lethal drugs used to fight malaria as treatments for covid-19. But that was just the final straw that pushed him out. Dr Bright had also filed a whistle-blower complaint over large contracts awarded by the Department of Health and Human Services on the basis of political connections rather than scientific considerations.

Dr Bright displayed a sense of urgency and said that the US now faces its ‘darkest winter in modern history’. He also warned that time is running out for the country to come up with a coordinated response to the pandemic.

In a tweet both related and unrelated, President Trump demanded that Congress subpoena his predecessor Barack Obama for committing the ‘biggest political crime in US history’. The president failed to provide any specifics on Mr Obama’s alleged crime other than stating that ‘he knew everything’.

Whilst it was revealed that another three million American workers filed for first-time unemployment benefits last week, bringing the total job losses for the past seven weeks to a staggering 36 million, President Trump admitted on the Fox Business Network that the economy is unlikely to show signs of growth before the fourth quarter. However, he did promise to Make America Great Again next year.

As the president was chatting away on television, party politics were back on the hill without ever having really left. Republicans called the Congressional hearing all sorts of names whilst Democrats sought to showcase the administration’s incompetence in handling the pandemic. The latter had a field day with veteran California Congresswoman Anna Eshoo stating that Americans are ‘afraid, sick, hungry, and jobless’: “The government that was supposed to protect them has failed.” Texas Republican Michael Burgess shot back – from the hip of course – and called the hearing a ‘political sport’.

Whatever US politics has become, it is highly dysfunctional and unworthy of a great nation – something it never ceased to be notwithstanding Mr Trump’s constant belittling of the country. However, seldom before have the countries of northern Europe looked more civilised, orderly, and well-governed than they do now when compared to the allegedly Greatest Nation on Earth. That, by the way, says more about the United States than it does about Europe. Sad, very sad.

Only in America

Preppers, survivalists, libertarians, and assorted make-believe soldiers of private militias will gather tomorrow around the Michigan state capitol building in Lansing to express their anger over Governor Gretchen Whitmer’s stay-at-home order, now extended to 31 May. Mrs Whitmer has become the focal point of right-wing protest against measures that seek to limit the pandemic’s impact on society. They argue that the restrictions infringe on civil liberties guaranteed by the US constitution.

Last month, a mob of gun-toting militia members staged displays of civic power and managed to enter the state house in a scene both intimidating to the representatives who work there and reminiscent of apocalyptic disaster movies depicting a world gone mad.

At the time, President Donald Trump suggested the governor strike a deal with the protesters: “Give a little and put out the fire.” In one of his many disjointed tweets, the president had called for the ‘liberation’ of Virginia, also ruled by Democrats, saying that the state was ‘under siege’ and peppering his rallying cry with the obligatory exclamation marks. The implicit approval of the president emboldened the protesters in Michigan.

On Tuesday, Michigan Attorney General Dana Nessel revealed that her office had detected a number of ‘credible threats’ against elected officials. In a Facebook group set up by militia members, commenters wondered openly how long it would take for the governor to meet with the business end of a shotgun.

Even Republicans are now scrambling to diffuse tensions and create a socially acceptable distance between their party and the mob. During Tuesday’s lockdown debate, Republican state senate majority leader Mike Shirkey called the protesters ‘thugs’ and their actions ‘despicable’: “It is never OK to threaten the safety or life of another person, elected or otherwise, period.” However, Republicans stopped short of banning the brandishing of weapons inside the state capitol as proposed by the Democrats. The sanctity of the second amendment is, after all, not to be violated.

However, ‘that woman from Michigan’, as President Trump insists on calling Governor Whitmer, may yet become a foe to be reckoned with. She stands a good chance of becoming Joe Biden’s running mate on the Democratic ticket. Notwithstanding the antics of local right-wingers, Governor Whitmer enjoys a 72 percent approval rating amongst residents of her state. According to a recent poll commissioned by The Washington Post, President Trump’s handling of the pandemic inspires trust in just 42 percent of Americans – a shockingly high number considering his erratic performance as commander in chief. Only in America.

Global advisory giant to launch major digital finance operation in Dubai

One of the world’s largest independent financial advisory and services organisations is to develop a major digital finance operation from Dubai, confirms its CEO and founder.

deVere Group’s Nigel Green made the announcement on Wednesday as the world readjusts to a post-pandemic new normal.

Mr Green comments: “The world has changed forever in the last few months, the market has changed and client expectations have changed.

“Much of this is being driven by new technologies and the rapid pace of the digitialisation of our lives, including our financial lives. 

“It was a trend that was happening pre-pandemic, but which has been massively accelerated because of it.

“Indeed, this new decade is being reshaped more rapidly and more dramatically than any other.

“To meet these fundamental shifts, we’re developing and building a major digital financial organisation from Dubai.”

There are, says Nigel Green, three main drivers why Dubai has been chosen for this by the organisation that does business in 100 countries worldwide.

“First, we already have had for more than 15 years a considerable footprint in Dubai and across the UAE, with many teams of highly talented individuals.

“Second, Dubai, which is already recognised as one of the most important financial centres in the world, can be expected to become one of the world’s top ten international financial hubs to rival and more aggressively compete with the likes of London, New York and Hong Kong.”
 
He adds: “Dubai is helped in this regard by having an independent regulator, an independent judicial system, a global financial exchange, a stable, pro-business government, a high proposition of high net worth individuals, a dynamic business community, world-class infrastructure, superior digital and telecommunications networks, English as its de-facto business language, and its enviable geographical location and time zone.

“And third is Dubai’s passion for and expertise in innovation. We’ve seen this in real-time as the emirate diversified from oil to become a truly global leader in trade, transportation, finance, tourism, retail and real estate.  

“This is exemplified by Expo 2020 Dubai’s theme, ‘Connecting Minds, Creating the Future’; as well as Sultan Al Mansoori, the UAE Economy Minister, saying recently that the new economy will now be built around digital.”

The deVere CEO says that the Dubai-based digital financial organisation will consolidate and “significantly further develop and expand” the organisation’s pioneering global Contactless Finance service and its world-leading fintech apps, which allow people to access, use, save, invest and manage their money 24/7, on-the-go, anywhere in the world.

Nigel Green concludes: “Our new Dubai-based model is designed for the new world with, as always, the client experience, and expectations and outcomes front and centre of mind.”

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.

Negative interest rates are coming, investors taking action: deVere CEO

Negative interest rates are coming and investors will now be looking to bolster their portfolios to ‘get ahead of the curve and build wealth’, says the CEO and founder of one of the world’s largest independent financial advisory organisations.

deVere Group’s Nigel Green is speaking out after rate options, which gauge monetary policy forecasts, implied on Monday a 23% likelihood that the key federal funds rate will drop below zero by the end of 2020, according to BofA Securities data.

It’s not just the U.S., the world’s largest economy, which is moving towards this scenario.

On Tuesday, the Deputy Governor of the Bank of England also suggested that the UK may be headed toward negative interest rates.

Mr Green comments: “A new global era of negative interest rates would have been unimaginable even a few months ago.  But this has now changed due to the coronavirus.

“As central banks around the world grapple to control the economic impact, it can be reasonably expected that more and more of them will take a dramatic change of policy course and take rates to below zero – like their peers in Europe and Japan.”

He continues: “There is legitimate debate about the efficacy of negative interest rates on boosting economies. 

“They could turn out to be a masterclass in the law of unintended consequences as they could be viewed by consumers and investors that the underlying economies are in a perilous position and, as a result, prompt a drop in consumer and investor demand.”

Whilst the debate on whether negative interest rates help the ‘real economy’ or not will continue, there is no doubt that they help boost financial asset prices.
 
“With this firmly in their minds, market-wise investors will know be looking to bolster their portfolios before the next round of cuts and the likely subsequent price increase. They are taking advantage of the lower entry points now before the next major rally,” notes Nigel Green.
 
He goes on to add: “In addition, those with savings in the bank are already getting no return thanks to the ultra-low interest rates.  Negative rates will offer them more reason to increase their exposure to equities, for example.”
 
The deVere CEO concludes: “The question mark remains on whether cutting rates from their already low levels will solve the issues created by the coronavirus outbreak.
 
“I believe, due to the economic situation and the hints from central banks, that there are more rate cuts on their way as they know it’s not sustainable to just keep printing money.

“This ‘direction of travel’ will push up financial asset prices and, as such, many investors are now looking to get ahead of the curve and build wealth.”