Nobody could have foreseen the disruption the coronavirus outbreak would cause when the virus was first reported back in late 2019. As well as having an unimaginable impact on public health and social interactions, the pandemic resulted in economic chaos around the world, where businesses went bust, unemployment skyrocketed, and consumer habits changed on an unprecedented scale. We may be in 2021 now, but the fallout is set to continue for some time.
In times of economic uncertainty like this, lots of people are content to simply place their money in cash accounts so they have savings to turn to in times of trouble. But some don’t just want to maintain a low-yield bank account — they want to see their money grow. And if that sounds like you, that means exploring investment opportunities. Here are four different routes you could consider.
1. Spread trading
Many people have turned to day trading during Covid-19 and this is an avenue you too may wish to explore. If you’re interested in how the markets move and are willing to put effort into learning about how trading works, this can be an exciting and fulfilling way to make your money grow.
One of the most accessible ways to trade is spread trading as you don’t need to own any underlying stocks, and you only need a small amount of a trade’s total value (a deposit, in effect) to enter a position. It’s also tax-free in some countries such as the UK. Make sure you know and understand the ‘spread’ in spread trading to calculate your trading costs. This is more straightforward when it’s a fixed spread. As trading services provider Trade Nation explains, these “stay exactly the same within specific trading sessions, offering total transparency so you can be certain of your trading costs.”
A variable spread, on the other hand, can change at any time. If it unexpectedly widens, your trading costs will suddenly be a lot more than you anticipated. As with all high-risk/high-reward investments, it’s important to note that you could lose all the money you trade, so you mustn’t risk more than you can afford.
In an interview with CNBC, prime real estate investor Thomas Balashev predicted “a lot of opportunity” for global investors to take advantage of distressed real estate assets off the back of Covid-19. And property investment can indeed be a promising source of income provided you examine the right factors before committing. For example, the neighbourhood and likely tenants, the average rent in the area, and the property tax you’d have to pay each year. If you make sensible decisions, you could make $100,000 and $150, 000 as a real investor per year, according to Financial Wolves.
Of course, you’ll also need to spend a large amount of money to pursue this route. Being a landlord means, as well as making a hefty deposit and paying the mortgage on a property, you’ll be legally obligated to cover the taxes and maintenance costs too. Plus, you’ll be responsible for your tenants, so make sure you’re willing to take on the time and effort this type of economic investment requires.
Purchasing a bond effectively means lending money to a business or the government, which will pay back this loan with interest over a set period of time. You can either hold your bonds and receive a regular, predictable income, or you could trade them. For example, if the borrower’s credit profile improves, the price of the bond may increase as they’re more likely to pay it off in time. As such, you could sell it and make a profit.
Investing in bonds may be a good option if you’re a more cautious investor as these are typically thought to be more stable and therefore less risky compared to other assets, such as stocks. However, the return on your investment is relatively small so bonds probably aren’t suitable if you’re hoping for significant growth. Also remember that the money you loan out will be locked away for an extended period of time if you hold to expiry and the level of liquidity – how easy it is to buy and sell – in the markets that trade bonds can vary.
4. Material goods
Material goods often appeal to investors in times of economic uncertainty as prices are less likely to be impacted by market turbulence, low interest rates and a bleak global outlook. Maybe you also like the idea of investing in something that you physically own. Common choices include wine, art and classic cars, which can be a good return on investment. For example, wine has historically outperformed stocks, yielding a return of 247% since 2004 compared to the stock market’s 129%. In addition to these conventional goods, Bloomberg has listed a number of promising alternative 2021 investments including cask whisky, music rights and insect farms.
This is only worth considering if you’re willing to become an expert in whatever it is you’re investing in. You’ll need to learn about pricing, signs of quality, how to spot fakes, and when and where to sell. As you need a lot of knowledge and enthusiasm, it’s best to choose an asset area you’re genuinely passionate about. However, be aware that material goods can be hard to value compared to traditional assets and returns tend to be volatile, making it harder to understand the risk. And while these aren’t so heavily impacted by the markets, their value does depend on current trends. Your investment may fall if the product suddenly goes out of fashion.
Simon Davies is a freelance journalist interested in marketing, tech and small business. Follow him at @SimonTheoDavies.