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Investing beyond Forex and Stocks

2nd March 2020 Print

Sometimes it pays to look beyond the obvious. So, if you have some capital to invest perhaps now could be a good time to look into some of the more unusual and less popular options available. There are a number of reasons for doing this, and the prime one is to diversify your portfolio as widely as possible. This is a well-known technique that offers the potential to see growth even in a low-interest environment, and which could also spell higher returns for you. So, if you’re interested in seeking out other investment opportunities that could prove to be a successful addition to your current strategy, here are five options that are well worth looking into.

Stock market indices

Stock market indices are used to measure the direction in which a particular market is moving. They are primarily intended to give investors, and other interested parties, an indication which tracks this overall information without going into how individual stocks and shares are faring.

By participating in stock market index trading, it can play an important role in a fairly passive investment strategy, in that they provide exposure to a whole industry. There are options to invest in all of the major markets including the FTSE 100, S & P 500, and the NASDAQ 100. This not only saves the time and effort needed to research individual companies, it doesn't bring with it the potential volatility of individual stock market investments.

Index funds

Index funds, as the name suggests, are funds that are constructed to closely mirror the particular stock markets on which they are being traded. Fund managers put them together to create a balanced and widespread exposure with relatively low operating costs, as well as a low turnover of investments.

No less an investment guru as Warren Buffett has recommended index funds as a good choice for those looking to invest in the long term as well as in the run-up to retirement. This is thanks to their comparatively low volatility, at a time when investors don’t want any nasty surprises upsetting their plans for the future.

Exchange-Traded Funds

Exchange-Traded Funds, or ETFs for short, are a basket of securities that are traded on an exchange in the same way that stocks would be. Unlike mutual funds which trade only once a day when the market has closed, ETFs’ prices can rise and fall throughout the day in reaction to trading activity. Within them, they can contain many different types of investments, including commodities, stocks, and bonds. A big advantage is the cost of investing, as the broker commissions are likely to be far lower compared to buying individual stocks.

Exchange-Traded Notes

Exchange-Traded Notes, or ETNs, are issued by banks and other financial institutions, and the returns they pay are based on a particular market index’s performance up until maturity is reached. They are a type of bond - but one which doesn’t pay any interest. Instead, they pay a return determined by the performance of the particular index over a given period.

ETNs can also be traded with investors buying and selling them, making money on the price difference. An ETN does not include the ownership of securities but is just paid on the return that a particular index produces. In this way, they are similar to debt securities.

So, hopefully, this has given you a few ideas about alternative investment opportunities that are available if you’re keen to broaden your portfolio. Some are more complex than others but, within the range provided, there should be the right one for you.