In 2020, many people looking at managing their portfolios find it challenging to do so.
The current pandemic has resulted in different market crashes, including the Dow Jones Industrial Average bringing about uncertainties to investors. Some resulted in completely halting from investing while others looked for alternative solutions.
It is understandable if the majority of the investing population decided to take a break from the markets. The economic climate isn’t showing much for investors to be confident in weathering such situations. While it is a safe move to withdraw for further investing, do you know that other investment options are available rather than relying on the stock market?
Commodities trading
Commodities are an investment vehicle that covers a wide range of different materials. From oils to precious metals, raw materials to produce, commodities are hot items needed in our day-to-day life. During trying times, some may find comfort in trading these assets due to being more sustainable than the volatile stock market.
While it may be a surprise that commodities trading can be sustainable amidst the current economic situation when employed with the right trading method, it can still be lucrative. Yes, this asset class still relies on the global economy, using a different strategy such as arbitrage can shift the uncertainty of most investors.
“Arbitrage is one of the fundamental pillars of financial economics. It seems to be generally accepted that financial markets do not offer risk-free arbitrage opportunities, at least when allowance is made for transaction costs. This notion is directly related to the law of one price, which postulates that in well-functioning, efficient financial markets, identical securities must have the same price, no matter how they are created,” a study published in the Penn State University said.
One advantage of commodity trading is the vast amount of options available to trade. Because of these different commodities, you also have the option of trading through contracts for differences (CFDs), which is mostly associated with trading crude oil as it offers high liquidity and volatility levels compared to trading stocks in oil companies that have lesser activity. Even without stock or physical ownership, you can still invest in the value of the asset through its price movement.
Forex trading
Forex trading is the most popular alternative investing method. This is fair to say as it is the largest trading market globally, which accounts for US$3 trillion of daily volume. Although popularity does not equate to risk-free as this alternative investment strategy also has its drawbacks. The use of arbitrage can also be applied in the forex market.
“Arbitrage trading focuses on price discrepancies of a currency in different exchanges. This does not rely on a country’s economy, rather, it takes advantage of market inefficiencies. Arbitrage also helps close the pricing gap in currencies by initiating trades on these exchanges,” explains Tony Jackson, Chief Executive Officer of Jubilee Ace, an automated trading platform.
Apart from arbitrage trading, other reasons why forex trading can be an alternative to investments are its high liquidity and volatility. These market conditions mean that traders can execute the transactions whenever they want, especially when there’s enough movement in currency values to present opportunities.
Like any trading, forex needs careful strategy and close attention. Whatever strategy you employ, it is always beneficial to ensure that you are studying the investment alternatives you’ll be entering.
eSports trading
According to a study by Hamri and Sjöblom, “eSports (electronic sports) is a form of sports where electronic systems facilitate the primary aspects of the sport; the input of players and teams, as well as the output of the eSports system, are mediated by human-computer interfaces.”
Trading this new instrument can also be lucrative, especially since it has been gaining popularity these days. As traditional sports have been put to a stop due to the crisis, more investors are flocking to eSports, creating more than a buzz and actual investments. This might be an excellent time to join the influx as well.
The takeaway
With all the current investment alternatives, every investor must be wary about placing your money in any investment vehicle. Thorough research and knowledge are needed for some strategies that can be employed with these trades. But, some strategy such as arbitrage does not require you to be an expert. “Speed is the most crucial factor to spot arbitrage opportunities, no need for any trends, you just need to be quick to initiate trades,” Jackson concluded.
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