As the COVID-19 pandemic continues into 2021, so has the surge into the digital economy. Many aspects of our lives have changed from how we get our necessities to even the way we grow our wealth. Despite all these changes, one thing connects them all: consumers’ need for technology. Using digital tools has made life more efficient, and investors are starting to use this to their advantage.
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Investors and the Digital Landscape
Back in the day, investors used to use finance-specific trade publications to get a hold of the new trends in the investment world. Now, it’s as easy as typing a few keywords on Google or scrolling through your Twitter feed. Technology has significantly changed the way we manage our financial lives. Whether it’s spending, saving, or investing our money, technology plays a part in it. Think about how much of your daily life involves using technology, and you’ll see how much influence it has over our actions.
In addition to that, technology is even more critical for managing finances for those who have investable assets. The more assets you have, the more important technology is.
Digital vs. Traditional Investments
Whether you’re a fledgling or veteran investor, it’s important to consider the risk factor and your long-term financial goals. Once you’ve evaluated your situation, you can make the right decisions as to where you should invest your money. One thing you should remember when it comes to investing is that it’s important to have an appropriate mix of investments. But if you’re not sure how to go about it, here are a few types of digital and traditional investments, along with their pros and cons.
Digital Investments
Digital investments like bond trading and cryptocurrency are known for their volatile nature. Despite this, the accessibility, transparency, and the possibility of high returns keep investors on the playing field. We see a surge in the cryptocurrency market this year, nothing like the market in 2017.
Digital Bond Trading
The bond market or fixed-income market is one of the oldest investment classes, where investors buy debt securities to fund corporations, mortgages, and infrastructure. Bond trading wasn’t meant to go digital, with many corporate bonds not trading at all. However, after the financial crisis, the forced shutdown of proprietary trading desks caused both banks to rebuild their trading infrastructure completely, adjusting to the digital era.
Because of the pandemic, the shift to electronic trading has surged, and it’s likely to continue into 2022. Investors who take advantage of electronic trading can benefit in various ways. Electronic trading allows the elimination of pricing differences, and when the prices become more efficient, firms get lower costs. It also lets your statement reflect real-time bids accurately.
Cryptocurrency
Cryptocurrency is a precarious investment, but that doesn’t stop investors and traders. Despite its volatility, cryptocurrency offers an alternative to more traditional investment options. When you keep your money in your bank account, your access can be limited or closed at any time. You also never know when your bank can get bankrupt. With cryptocurrency, your assets aren’t controlled by financial institutions. Aside from this, they have high liquidity- you can buy and sell them easily at close to market price.
This type of investment also attracts younger investors, as the cryptocurrency market is generally easier to understand than other investment opportunities.
Peer-to-peer Lending
This type of investment involves lending and borrowing money online. They work just like traditional lenders, where a user borrows a certain amount and has to pay it back with interest. An interesting aspect of this type of investment is that you can split the amount being asked for among other people.
Traditional Investments
Traditional investments have existed for a long time, but they’re still quite hard to comprehend compared to digital investments. However, they’re generally more stable when it comes to returning, but stability comes at a cost. In exchange for stability, traditional investment returns aren’t that high. If you want to earn a lot from these assets, you’ll have to work for them.
Stocks
The stock market allows investors to buy and sell shares. To many, this is one of the best places to increase your wealth. However, you mustn’t invest all your money into it. Taking slow and calculated steps when playing the stock market is the best way to go. This is especially true for individual stock buying, where value investing is important.
These days, some apps and brokerages can help you properly invest in stocks online. If you’re not a fan of personal interaction, it’s a great way to get the ball rolling.
Real Estate
Real estate investing comes with a lot of benefits if you choose your assets well. High returns, tax breaks, and predictable cash flows are just some benefits investors can get from real estate. If you can get the best mortgage rates, choose a good property, and build its value, you’re sure to be on the path to good earnings. However, adding to a property’s value requires extra effort and additional expenses brought about by replacements, repairs, and maintenance. These are the key ways to keeping your tenant happy and in your property, so if you can do that, you’re in the clear.
In some cases, you don’t even need to purchase a home to invest in real estate. Companies like Funrise allow you to invest in properties for as low as $500. This is a great option for investors just starting and don’t want to invest too much of their money. The CrowdDD is a platform that provides interested parties with first-hand investor reviews on Fundrise and other crowdfunding platforms to make educated decisions on where to commit their money.
Mutual Funds
A mutual fund is made up of a collection of money from different investors and is used to invest in securities and other assets. This is the best way to start investing before trying out bonds or stocks. Mutual funds allow you to have a wider portfolio of stocks and bonds all at once without having to trade them yourself.
Not only are they cheaper, which makes them a great option for fledgling investors, but you can save money by buying directly.
Robo-advisors
Investing should be accessible for everyone, and that’s where robo-advisors come in. As their name implies, these are financial advisors that help you with your financial investments by giving you algorithm-based advice. They’re also more convenient and affordable compared to traditional management firms and investment brokers.
Depending on how much you’re willing to invest, different robo-advisors may be more suitable for your needs.
The Bottom Line
Investing can usually be a difficult and confusing process without the proper resources. But as technology continues to develop, investing has slowly become more accessible to people and allows even beginner investors to grow their finances. Depending on your ability and interests, there are different kinds of ways you can invest your money. With a little research and the willingness to take the risk, you’ll be on your way to financial growth in no time.
