2020 was a shock to the financial world and the lives of virtually everyone in the world—the collapse of the stock market in the Corona Crisis. The crash of stock indices to the extent of the Great Depression. The excessive market volatility due to the anticipation of the U.S. presidential election and the vaccination against the Coronavirus, as well as macroeconomic changes - all of these cause experienced speculators to watch the news and look for new assets to diversify their portfolios. In this article, I have put together some models for activity in the financial markets in 2021.
The foreign exchange market is a financial market where currencies are traded 24 hours a day, Monday through Friday, every week. For some, this is just a way to exchange one currency for another (this option is often used by international companies that have branches in several countries). However, this market is also characterized by traders who want to make money from the price movements. Anyone can open an account with a stockbroker and trade the full range of world currencies.
An obvious advantage of Forex trading is the wide range of instruments and the relative ease of working with this type of asset. The availability of news affecting price movements increases the attractiveness of such investments, as even small retail investors can analyze the flow of information and make accurate forecasts based on it.
The main disadvantage of investing in currencies is the high volatility, which depends on economic news and events that have little to do with finance. This sometimes makes it difficult to see the current trend even when fundamentally important data is released.
Buying and selling securities has long been one of the most popular investment forms in the financial markets. Meanwhile, shares are among the most complicated assets to trade. Nowadays, the shares of IT companies (including Google, Microsoft) enjoy great popularity and the shares of major international banks.
The advantage of this form of investment is the wide choice of assets and trading styles, so you can pick exactly what is best for you.
The disadvantage is the need to constantly monitor what is happening in the market, especially if you are trading stocks of several companies simultaneously. If you miss important news, you risk misinterpreting the actual market situation and making wrong trading decisions.
Investing in market indices is an exciting alternative to buying conventional shares. Promising indices are those of the most famous stock exchanges globally (in London, New York, Paris, and other major cities). The value of any market index is formed by the total value of the stocks included in it, and the average price movements of each stock are used to determine whether the index value has increased or decreased on this or that day.
As for stocks, this type of trading is quite complicated. It is necessary to have information about stock indices and their composition and to constantly monitor the entire market's dynamics. However, this is not a problem for many investors: it is much easier to find information about the economy of a whole country than news about a particular company.
With an ETF, or Exchange Traded Fund, investors can buy several stocks or bonds in one package. The money invested in an ETF is used to fund all the assets it contains. For example, if you buy an ETF for the S&P 500, your money will be invested in the 500 companies it contains.
ETFs provide access to various stocks, bonds, and other assets at a minimal cost. Such investments help diversify risks; also, the set of stocks included in an ETF is more liquid than mutual funds.
The disadvantages of such investments are a rather low rate of return and a service fee - this is the price for the minimal risk.