Now a lot of people are talking about investments and possible ways to get additional income from investments. But not everyone has the time and opportunities to understand all the nuances of investing. Today we will figure out what to do for those who want to start investing, but do not have the time and opportunities to understand how this process works. There are several ways that you can make money in the financial markets without the necessary skills.
Mutual funds
Mutual investment funds (mutual funds) are a type of collective investment. In fact, this is a common investment portfolio acquired with the funds of a large number of investors. A large amount of money, which managers operate, allows you to get a high income. The meaning of investing in mutual funds is as follows.
Investors acquire shares – parts of investment funds. Their investments go into circulation. By pooling the investments of private investors, it is possible to diversify the collective investment portfolio most effectively. The acquisition of a large number of diversified assets helps to balance the portfolio. In the event of a fall in the value of some assets, the losses incurred are likely to be compensated by others. Mutual investment funds are managed by management companies, which must be licensed accordingly. The specialists of the management company are engaged in continuous analytics, acquire promising assets and get rid of ineffective ones. The distribution of profits between investors is carried out in proportion to the share of their investments. The management company itself receives remuneration in the amount of a certain percentage of the total value of the fund.
The advantage of investing in mutual funds is a low entry threshold. You can buy shares even for the amount of several hundred dollars. If desired, shares can be purchased. Also, this type of investment does not require any effort from the investor. All management of mutual funds is carried out by professional managers without the consent of private investors. As for the shortcomings, in this case, a relatively low profitability can be distinguished. The legislation prohibits investing the funds of investment funds in high-risk assets that allow you to get a lot of income. This is done in order to secure the funds of the shareholders. In addition, the services of the management company are paid in any case, regardless of the profitability or unprofitableness of the fund. Therefore, before becoming a shareholder, you need to look at the indicators of the fund's profitability. Past performance does not guarantee future performance, but this information is helpful.
Fiduciary management
Fiduciary management is a client asset management service. If an investor has a free amount of money that he would like to invest, but does not have time to do it, then this service will solve his problem. Fiduciary management services are provided by specialized management companies, investment firms and even brokers. An individual trustee, who will manage the clients assets instead, is assigned to the client. You can either transfer your own investment portfolio to management or purchase a ready-made set of securities. In the first case, the manager will adhere to the strategy chosen by the investor, adjusting it, if necessary, in agreement with the client. In the second, the investor chooses the most suitable strategy from those proposed by the manager. It is also possible to develop a strategy from scratch. Based on the financial goals of the investor, the expected investment period and the expected return on investment, an individual strategy is developed and an investment portfolio is drawn up. The manager can manage the clients assets completely independently and report the results on a monthly basis. Or all operations with the investment portfolio are coordinated with the investor. When choosing a manager, you need to pay attention to his or her statistics, which, as a rule, are freely available.
The main advantage of fiduciary management is an individual approach. It is possible to adjust the strategy in accordance with the needs of the investor. Also, unlike investments in mutual funds, the investor is not limited in the choice of instruments. If he fully understands and accepts the possible risks, then his investment portfolio can at least completely consist of high-risk assets. Among the disadvantages of fiduciary management, a high entry threshold can be distinguished. It will not work to transfer a small amount to management. The minimum amount that can be transferred to management, as a rule, is several tens of thousands of dollars.
Social trading
The opportunity to work in financial markets is not only for investors, but also for traders. You can also trade on the stock exchange without special skills. For this, there is the concept of social trading. In general, social trading or copy trading is about copying the trades of more experienced traders. Social trading can be both automated and manual. In the second case, the investor independently copies the deals of other traders, information about which they post on specialized resources.
These can be messenger chats, blogs, or even YouTube channels. Automatic copying of transactions is carried out using copy-trading services. These are platforms that are integrated with the trading terminal and allow you to copy the trades of the trader to whose strategy they are connected. Examples of such services are HeartBeat, 3Commas, and other similar platforms that allow broadcasting trading signals. In order to connect to the trading strategy of a managing trader, it is enough to have a trading account and subscribe. The subscription price is usually set individually by the signal provider. On average, the size of the commission to the managing trader is 15 – 20 dollars per month.
After subscribing, all operations performed by the signal provider are automatically copied by the trading terminal of its subscribers. If any of the copied positions seem to the trader to be unprofitable, it is possible to close it yourself.
You can also place stop orders that will automatically close the copied positions if the specified drawdown level is reached.
The main advantage of social trading is the ability to perform transactions on the exchange without the necessary skills or time. Social trading has a fairly low entry threshold. Copy trading services do not set a minimum deposit. Therefore, you can start trading with any amount on your account. However, it must be remembered that some transactions cannot be copied with a small amount in the deposit account. As for the disadvantages, the main difficulty is choosing an effective managing trader. Most of the services provide an opportunity to view the statistics of signal providers. You can see the indicators of the profitability of his or her strategy. However, as already mentioned, past income does not guarantee future returns. But at the same time, the commission is paid to the trader, regardless of whether the subscriber was able to make money on copying the strategy or not.
Algorithmic trading
This is another type of automation of trading operations on the exchange. Only, unlike copy trading, all transactions are made by trading robots. Trading robots are special programs that allow you to automate the process of making transactions.
All transactions are performed according to a predetermined algorithm. There are fully automated algorithmic trading programs that do not require the direct involvement of a trader. It will be enough to configure them initially. Then the system will act on its own. There is another type of trading robots – semi-automatic. They are also called trading advisors. In this case, the program analyzes the market and offers the trader the most profitable deals. The final decision remains with the trader. He can confirm the opening of a position, or reject it.
Even a novice trader can trade using trading robots. However, this method is not suitable for those who are not at all versed in trading on the exchange. Despite the fact that transactions are performed automatically, the trader must understand what algorithm is used for this. This is necessary in order to periodically adjust the trading strategy. Of course, you can always turn to specialists for help, but the trader will have to determine the moment when the strategy is no longer effective.
As for the advantages, the main advantage of algorithmic trading is the lack of a human factor. Many newcomers to the exchange make mistakes and suffer losses due to emotions. Trading robots are free from this drawback.
