How to make money with cryptos

Even while the market is crashing – By a former Goldman banker, part 1/4

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The basic conceptCryptocurrency futures arbitrage

A former Goldman banker gave us some great insights into making consistent money through futures arbitrage in the crypto market. He made $20,000 through this trading strategy. A 40% annual fixed profit!!

It is a simple trading strategy that allows to secure high profits from the cryptocurrency boom without being exposed to the infamously large price swings of cryptocurrencies. All popular news outlets have run stories about futures arbitrage in recent weeks but so far it is still unclear for many traders about how easy it actually is to implement in their own trading. We break it down into 4 simple steps that any trader could implement in literally 5 minutes!

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How to start

Create an account on Binance and sign up for spot and futures trading. Read through our strategy and decide if you want to cash in by executing this 5-minute trade which can bring major returns.

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The Underlying Principle – “Cash and Carry”

The cash and carry trading strategy has been around in many markets for as long as trading itself. The idea behind this strategy is to buy the underlying asset such as a commodity or a given bond in the spot market (for the “cash price”) and sell the same amount of the asset in the futures market for a higher “futures price”. The different between the futures price and the cash price is called “carry” – when positive, it can secure a fixed profit.

Cash and Carry in Crypto Markets

While in classical markets the “carry” is typically a very low number of percentage points and gets easily eaten up by the cost of storing the commodity purchase in the spot market (you can’t simply put your gold into an electronic wallet), the carry in cryptocurrency markets can be up to 40% annualised without any storage costs! You read right, this means up to 40% fixed profit.

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How it works A simple example

The price of Bitcoin today is say $30,000 but the COIN-M futures price maturing on 24th September 2021 trades at $33,000. You buy one Bitcoin today and sell the Sep-21 COIN-M future and hence lock in a carry of $3,000. The idea is to buy Bitcoin now and agree to sell it at a higher price in the future and pocket the difference.

If the price of Bitcoin goes up you earn money on the Bitcoin you own (you are “long”) and lose the same amount of money on the COIN-M future which you have sold (you are “short”). This means that you are protected against upwards and downwards movements of Bitcoin (you are “delta hedged”) and make a fixed profit of $3,000 at maturity irrespective of where the Bitcoin price goes.

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The carry of $3,000 in this example translates into a profit of 10% for an investment of only 3 months. In annualised terms this represents a profit of about 40%, assuming you do the same trade 4 consecutive times over a time period of 12 months. This is a full 40% more than your bank gives you on your deposits! 

Do remember that you will need to open an account on Binance to make this trade. You don’t need to invest as much as the Goldman banker we spoke to. A small deposit of $100 can always get you started off. Stay smart to make consistent profits!

To continue reading about this strategy please follow our next 3 steps in the coming few days: How to execute this strategy on Binance, Why the crypto futures arbitrage strategy works, and What is the hedge sizing required to make futures arbitrage work with crypto.

The Information contained in or provided from or through this website is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice. Crypto trading is highly risky and can result in financial losses. You should assess the risk before putting in your money.


Trading from your sofa? | A look at pandemic investors

By now most of us are aware that investing has become hugely popular over the pandemic – people have more spare money and time to invest. You might be surprised however, at who has been learning to trade, read our article to learn more. 

Over the coronavirus pandemic the public have had a keener interest in the state of the economy, this partnered with more free time and arguably more disposable income has allowed for some sidelined hobbies to take centre stage. Amongst gardening and interior design we have seen a huge resurgence in investing!

Social trading platform, eToro has seen a crazy 420% increase in stock trades in 2020 compared to the previous year. The rise of ‘working-from-home investors’ paired with the launch of eToro’s zero commission trading is a winning combination. 

If you want to take advantage of eToro’s zero commission, sign up now!

Who are these pandemic investors? 

Over the past year millions of people have joined the world of investing. The media has often depicted young people as the main demographic of new investors but this isn’t true! Over the past few years it is true that investors have gotten younger and more women have got involved but over the pandemic it is actually the older generation who’ve been trading from their phones. 

Investopedia found around 60% of people who have taken up trading over the last year are between 40 and 74 years old. With 30% of new traders 24-40 that leaves only 4% of new traders being the young folk pictured in the media (18-24). Although eToro, a popular brokerage saw around 40% of their new customer base were under 29 years old. 

So how are people learning to trade?

Most people (47%) are learning to invest and trade themselves using a range of resources from websites to books, the least favoured category is the 5% who have learned from social media. 

A massive 84% of investors surveyed by Investopedia used financial information websites to learn how to invest with the second most favourable source being financial news outlets. 

On top of this a whopping 50% of investors knew very little before the pandemic showing a huge increase in interest in investing money for the future. 

So are new traders making a profit?

An incredible 86% of investors say they have made a profit over the last year. When looking at new investors, 53% admit to taking a loss. Interestingly new traders are more likely compared to experienced to hold their portfolio for a short period of a month or less. On the other end of the spectrum we can see most non-trading investors (58%) holding their portfolios for more than 5 years. 

Where do you think most new investors are going wrong? Although three-quarters of new traders are confident with their skills, those who admit to mistakes show some interesting results. A massive 56% of new traders hold the majority of their portfolio in only one stock or asset class. Overweighting is an easy mistake to overcome, by trading a variety of assets you can diversify your portfolio and protect yourself from the risk of one asset failing. You’ll thank yourself later when that risky IPO you were going to go all in on flopped. Another common mistake new traders made was being too reactive, 28% traded on a gut feeling alone. To trade successfully the most reliable method is looking at the data and analysing trends, although we’re not saying trading on intuition can’t be successful, it definitely isn’t reliable. 

The stats show that new traders typically go for headline investments such as Bitcoin, Tesla, GameStop, Amazon and Apple. Which isn’t really a surprise as it is these very headline names that can get people interested in trading in the first place!

Do you want to be part of the 84% success of new investors? If so, we recommend eToro and easyMarkets for beginners. 

Amazon stock beats earnings yet again | Stocks to buy

Amazon (AMZN) has been on the watch list for a while now, leading the pandemic field e-commerce boom. This week has been big for earnings reports with Amazon reporting impressive revenues for the first-quarter on Thursday. Both the first and projected second quarter revenues far exceeded expectations putting the spotlight on the e-commerce giant. Amazon’s profits have been surging through the pandemic and now boasts 200 million Prime members worldwide. Let’s dive into the details and see why Amazon stock is still a buy. 

The online retailer’s stock has risen 46% the past year and some analysts think it could still have further to go. As a result from this fantastic earnings report AMZN stock climbed 3.4%, giving it a good start.

Source: Money CNN

Amazon reported revenue of $108.5 billion far exceeding analyst expectations that fall around $104.5 billion. This gives the company a year-on-year growth of 44%! Expected revenues surprised us too with second quarter predictions at $110 – 116 billion – way above the $108.5 billion estimates. Operating income is not that unchanged year-on-year due to around $1.5 billion of costs accountable to Covid-19.

So what is next for Amazon? 

Whilst their cloud services division, Amazon Web Services, rose 32%, they have big plans to take this even further to expand virtual healthcare in the US. This tackles two of their targeted segments that makes Amazon the household name it is today. AWS is a profit powerhouse. In 2020, even though the segment made up just 12% of sales, it created a massive 59% of all operating profits.

“I think the power of AWS and their advertising and other software parts of their business and subscription models are the most exciting”

Tech Analyst Brent Thill of Jefferies 

So how do Amazon compare to competitors?

Currently, Amazon is the third-largest publicly traded company in the world, just behind Apple and Microsoft. Where Amazon sets itself apart is its cross-sector approach, the e-commerce giant does not stick to a particular consumer category being the “Earth’s biggest bookstore,” and leader in cloud computing. What is also easily forgotten is that Amazon works across the world and even generates through brick-and-mortar stores including Whole Foods and Amazon Fresh. 

Looking at price-to-earnings (P/E) valuations for the six major tech stocks, Amazon doesn’t show the greatest promise. AMZN has the highest P/E ratio meaning big investments give comparatively smaller profits. But it is good to remember that this doesn’t stop the company from impressive growth that consistently outperforms expectations. 

Amazon leads the pack having the most impressive potential growth and highest share “buy” ratings according to Wall Street experts. 

These are just estimates, of course, and there’s no guarantee AMZN will get there. But the consensus of optimism among Wall Street firms is noteworthy nevertheless.

Should you buy Amazon Shares?

The current consensus among 50 polled investment analysts is to buy stock in Amazon.com Inc. This rating has held steady since March, when it was unchanged from a buy rating.

Source: Money CNN

Amazon seems like a pretty reliable investment, but you could increase your earnings potential by timing your entry perfectly. Shares edged up 0.4% to 3,471.31 on Thursday, in range from a 3,436.03 handle buy point. This coincided with an early February peak for Amazon stock. Investors also could use 3,552.35, just above the consolidation high, as another entry.

Amazon Stock Price Forecast

The 45 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of 4,000.00, with a high estimate of 5,200.00 and a low estimate of 3,420.00. The median estimate represents a +15.18% increase from the last price of 3,472.72.

Source: Money CNN

“With broad-based strength across e-commerce & AWS, Amazon’s Q1 ’21 earnings report demonstrates why it remains the industry leader.”

Michael Lasser, analyst at Swiss bank UBS
raised his price target for Amazon to $4,350 from $4,150.
Source: Money CNN

Consistently outperforming revenue expectations imply that future earnings may exceed analyst forecasts. Needless to say Amazon’s impressive record of growth means their shares will make a strong addition to your portfolio

There is a strong case for buying Amazon shares. Start building your portfolio now with  eToro and easyMarkets

Can the Bitcoin bubble burst?

By now we all know someone who has made some serious profit from investing in cryptocurrency. Crypto has traditionally been seen as extremely high risk, but with institutional investors getting involved, is there still a chance crypto markets could crash?

Bitcoin began trading back in 2009 when you could grab yourself a single Bitcoin for an eight-hundredth of a cent. Now a single Bitcoin is worth around $63,000 USD showing the phenomenal growth of the cryptocurrency over such a short period. Last year saw Bitcoin boom, but can it keep it up?

Bitcoin is a perfect 12-year-old bubble. The cryptocurrency has no intrinsic value so is a purely speculative asset whose value is controlled by market forces. There are a few other things that make Bitcoin special, including the fact that you still have a cost of production or “mining” as well as there being a total known quantity of 21 million. 

Ready to invest? Start building your portfolio now with  eToro and easyMarkets

While you might think Bitcoin is best placed next to the word bubble, there are other speculative bubbles out there. There are real-world cases of hyperinflated or valueless money out there. Most fiat currencies fall into a fundamental equilibrium where the value of the currency is stable, yet in a few cases such as Venezuela or Zimbabwe this fundamental equilibria that is relied upon has gone wrong and the price of money exploded. While most fiat currencies opt for the well-behaved fundamental equilibrium, there is an infinite range of equilibria that can support a stable currency price, and if this can happen to fiat currencies there is the potential for cryptocurrencies to stabilize too. 

Bitcoin is currently on a non-fundamental explosive price equilibrium and so does not make it seem like a low risk asset to invest in. Furthermore, Tesla’s recent Bitcoin buy-in boosted the crypto’s price significantly demonstrating that the exit of a large player could make Bitcoin price fall. We can use the case of GameStop to show how risky it is in theory to invest in an asset that’s price volatility is not based on a value anchor. 

The odds of Bitcoin crashing to zero at around 0.4%

In 2018, two Yale University economists (Yukun Liu and Aleh Tsyvinski) published a report titled ‘Risks and Returns of Cryptocurrency,’ that examined the risk of Bitcoin collapsing to zero within a day. They used Bitcoin’s historic returns to calculate the probability of a crash to zero at between 0% to 1.3%. If we compare this to a fiat currency, the same economists  found the euro has a 0.009% chance of collapsing to zero, so falls within the calculated range. While many try to argue that the lack of an intrinsic value means Bitcoin could collapse the mathematics and consumer confidence support Bitcoin. 

It might seem sensible to turn to the 2017 bubble to see how crypto’s can have a snap change in price. However, while the bubble back then was based on hype and alt streams of investors, the rise in crypto over the past year has a stronger base. So why is that?

  • A safe investment: Firstly, with the threat of economic reckoning due to Covid-19 many investors are switching from properties, savings and bonds to safe-haven assets and digital stocks. As Bitcoin is essentially a mix of both with the added bonus that some governments and large firms such as Paypal are adopting it as a valid payment method mark cryptos as a winner. 
  • Tech upgrades: Crypto technologies are being updated so they don’t require such energy-intensive computing processes which saves those who avoid crypto’s based on environmental grounds. There are also new layers of blockchain being developed to integrate crypto’s better into financial markets. 
  • Institutional security: Many institutional investors are now investing in cryptocurrency which gives a safety net for any big price changes in crypto. 

While half a decade ago you would be right in saying that cryptos are high-risk and a foolish investment, recently there has been a huge amount of support from large organisations. 

In recent months, there’s been a flood of institutional investment in Bitcoin, with companies including MicroStrategy, Tesla, Square, and Aker ASA buying Bitcoin for their corporate treasuries. Simultaneously, Canada’s Purpose Bitcoin ETF was launched as the first of its kind. This institutional investment has supported Bitcoin’s current bull run and counts as proof that cryptos are here to stay. 

While it is a fact that all cryptocurrencies are volatile and will remain speculative assets, the support of institutional investors and the solidification of cryptos as a new economic infrastructure means that cryptos are here to stay.

With the odds of Bitcoin crashing to zero at around 0.4% it would take a monumental feat and would be nearly impossible to achieve. Do you support crypto?

Coca-Cola | Stock to buy?

Coca-cola co. (KO) stock has been winning this week after revenues are looking up. With the pandemic coming to an end, can coca-cola keep up the gains?

Coca-cola suffered through the pandemic losing around half of usual sales. Before the pandemic, the company was building some serious momentum with a 16% sales increase at the end of 2019. Coke saw a 28% sales drop in the second quarter of 2020 which set poor performance as during the pandemic. Despite this, the company maintained strong balance sheets and continued to pay dividends unlike many which cut their payouts due to exceptional circumstances.

The first quarter of 2021 saw the company making a comeback with its first positive revenue after four quarters of losses. With lockdowns easing worldwide, can Coca-Cola pick up from where it left off pre-covid? The company has posted strong revenue growth over 2021 although their path to recovery is understandably unclear.

The pandemic shed light on some trouble areas in the company’s business model. With major changes to consumer behavior Coca-Cola tried to adapt by cutting costs, improving their marketing strategy and laying off workers. During this process they reduced their range of brands from 400 to 200 and launched more scalable brands. Competitor PepsiCo (PEP), whose beverage segment is not as large as Coca-Cola’s, weathered the pandemic better due to its more varied product range, including some food brands.

KO Dividends

Coca-Cola is valued for its dividend, which yields 3.1% at the current price. The company has raised its dividend for almost 60 years in a row. The company has an incredible track record of dividend and is committed to continuing this,no matter the challenge. 

KO Analyst Recommendations

The current consensus among 26 polled investment analysts is to buy stock in Coca-Cola Co. 

Graphic source: Money CNN

KO Price Forecast

The 22 analysts offering 12-month price forecasts for Coca-Cola Co have a median target of 60.00, with a high estimate of 67.00 and a low estimate of 53.00. The median estimate represents a +10.11% increase from the last price of 54.49.

Graphic source: Money CNN

Short-term it is unclear how quickly Coca-Cola gets back on its growth track, but long-term they are sure to expand and increase sales. Will you be investing? If so, we recommend eToro and easyMarkets for beginners. 

Trading 101: Options

Options trading allows you to hold a contract to buy or sell any underlying asset at a certain price over a certain period of time. This can be a much safer way to invest with high leverage compared to CFD’s. Read on to understand the basics!

What is options trading? 

Options trading involves buying and selling options as contracts that give the investor the underlying asset at a set price if it changes price within a set timeframe. Buying and selling options are done through contracts. There are two fundamental types: a call option lets you buy shares at a later time whereas a put option allows you to sell shares at a later time. For example, if you expect the price of gold to rise from £1,200 to £1,300 over a couple weeks you can buy a call option that allowed you to buy the market at £1,250 at any point over the next month. If the price of gold rises above £1,250 (the strike price) before the month is out you will be able to buy the market at a discount. However, if the price stays below the strike price then you lose the premium you pay for your position. So essentially, you are at risk of losing £50 if the strike price is not hit but if the price goes above the strike price you have an unlimited profit potential. 

In the UK you typically trade options using spread bets or CFDs. This works instead of trading them directly. Trading options as leveraged products works similarly to CFDs or spread bets which allow you to speculate movement without actually owning the underlying asset. This is both a blessing and a curse as it magnifies your wins but also your losses. Your risk is limited to the margin you paid to open the position although it is important to note that when selling call or put options you have a potentially unlimited risk. 

What sets the difference between options and futures is that options allows you to withdraw from the options contract at any point with your loss set a premium (the cost of the option) that is based on a percentage of the assets market price. This means there is a much lower risk than trading futures. 

When trading options a contract will have the following elements:

  • Stock ticker
  • Date of expiration
  • Strike price
  • Call or put
  • Premium price

Put together this would look something like this: 

APPL 26/03/2021 400 Call @ 5

What are call options?

Buying a call option gives you the right, but not obligation, to buy the underlying market at the strike price before a certain date. This lets you make profit as the market value increases. The fee you are paying to buy the call option is called the premium (it’s essentially the cost of buying the contract which will allow you to eventually buy the asset) which is comparable to making a down-payment. You pay for a contract that expires at a set time but allows you to purchase an asset at a predetermined price. You will have the choice to renew your option as their value decays over time. 

As with all trading you can also sell, in this case you will have the obligation to sell the market at the strike price if the option is executed on expiry. 

What are put options?

There are also put options which give you the right, but again not the obligation, to sell a market at the strike price within the expiry. In this case the more the market price drops, the more profit you make. If you choose to sell put options you will have the obligation to buy at the strike price if you exercise your option. 

So how do you calculate an option’s price?

There are three factors that affect the premium you pay when trading options which work to determine the likelihood the underlying market price will be above or below the options strike price at expiry. 

  • How high or low  the market is compared to the strike price: The further below the call options strike or the higher above the put options strike the higher the premium you are required to pay. This is as there is a high chance that the option will expire with value. 
  • The expiry date: The longer the option is open before it expires the more time there is for the market to pass the strike price. This means the closer you get to the expiry date the lower the chance that the option will expire in profit so will lose value. 
  • Volatility: The more volatile the market is the more likely the price will pass your strike price. In actuality a higher volatility will increase an options premium. 

Risk when trading options uses Greek symbols for each variable that affects price. 

Source: Robinhood

What are the safest options trading strategies?

The most simple and common strategy used involves buying a call option when you expect the market to rise. If this works out, then you will profit when you sell your option before the expiry or let time run out and exercise your right to buy at the strike and profit this way. This is a great strategy for beginners as you cannot lose more than the premium you pay when opening your option. 

A more complicated strategy but one that is key to learn is hedging your investment. If you want to avoid the potential market fall you can buy a put option. A married put means if the asset price falls you would make gains on the put to help limit your loss. 

What time frame should you use?

You can execute an options trade on a timescale from daily upto quarterly. If you want to open a position quickly whilst ensuring you have a lot of control over your leverage you can use daily or weekly options. Whereas if you’re looking at a longer-term movement in a market choosing monthly or quarterly options means you can know your risk upfront. 

What are common mistakes to avoid when trading options?

Although you can, it isn’t always advantageous to to hold a call or put an option until the expiry date. If your option has increased enough (beyond the strike price) then you can close the contract to take the profit at that point. Holding out may give you a greater profit but especially in highly volatile markets there is a chance the market price will fall again just before the expiry. 

Another common mistake is to not have an exit plan. By creating a plan before hand you can exit an option when you reach a loss or profit that you are happy with, similar to stop losses and take profits. This way, you can close your option with a profit or loss ou are comfortable with instead of letting the contract expire and the decision being taken from you. 

One more thing to be wary of is that cheaper option premiums aren’t necessarily better as this means you option is more ‘out of the money’ meaning the investment is riskier and the potential for profit is much lower. The highest risk option is buying an ‘out of the money’ option as this means the underlying security is far from the profit line. 

What are the pros and cons of options trading?

Options trading is pretty safe making it a great way for beginner traders to step up their game. Options are typically more resilient to changes in price direction changes allowing you to make profit over time without having to invest directly. 

As with all trading there is some risk involved depending on the level of volatility of the market you choose. Options are typically more expensive if there is higher uncertainty meaning the more volatile the market is for that particular asset the riskier it is to trade. 

At the end of the day if you understand what you are getting yourself into and are comfortable with the risk options can be very lucrative. Want to invest? We recommend eToro and easyMarkets for beginners. 

Should I buy Deliveroo shares?

Two weeks on we see how the Deliveroo IPO went. Deliveroo (ROO) failed to deliver in its London IPO last month, with shares plunging as much as 30% in its first day of trading. CEO admits the end of lockdown will hit their growth. So is Deliveroo one to avoid?

The stock floated at 390p but has since fallen to 269p two weeks later with the CEO’s worries dropping the shares a further 3p. Goldman Sachs and JP Morgan, which led the float have been accused of valuing the company too high especially in the current uncertain environment.

Chart: LondonStockExchange

Yesterday, Deliveroo CEO Will Shu shares concerns that the end of lockdown will hit company growth resulting in a wobble to their stock price. Some analysts were concerned that the IPO would do great but then would sharply drop for this very reason. As lockdown measures ease and the weather gets better, the public are more likely to want to go out and about to enjoy pubs and restuarants rather than hae a night in.

“Deliveroo expects the rate of growth to decelerate as lock downs ease, but the extent of deceleration remains uncertain.”

Some investors avoided the company out of concern for workers rights. A central part of the Deliveroo business model is to have workers that are super flexible but with a workforce of over 100,000 globally it might be time to change their tune. Supposedly, rider satisfaction is at an all time high at 89%.

Another issue has also arisen, CEO, Shu, has given himself voting rights well above his stake in the company due to his innovative dual share system he brought in.

Overall, Deliveroo has been performing phenomenally during lock down with sales growing 114% in the first three months of 2021. The 71 million orders that amassed over this time gave a nice £1.65billion take for the food delivery company.

The food delivery company now reaches over 60% of the UK population and says the different levels of lockdown restrictions across 12 markets will give an idea how people change behaviour with easings. For example, even since lockdown restrictions have been removed in Hong Kong, there is still resilient growth for Deliveroo,

Should I buy Deliveroo stock?

I believe the Deliveroo share price is more reasonably priced than in its IPO. But I still think it is overpriced. In fact, the company has a price-to-book ratio of around 27, which is a major indication of over-valuation.

Deliveroo share would make a good long-term investment, even if it takes some time to resolve its issues. If you want to start trading, we recommend eToro and easyMarkets for beginners. 

ESG investing | What is sustainable investing?

ESG investing is becoming hugely popular. But are environmental, social and governance ethical companies really going to make you profit?

ESG is an acronym for environmental, social and governance, all issues that people are seriously considering when choosing where to invest. ESG is a way of evaluating a company’s environmental and social impact that represents a set of positive social outcomes, against which a business or an investment can be measured. It evaluates everything from how sustainable the company’s energy use is to if they test on animals. 

This interest in socially conscious investing has grown from the general public and into how businesses are run. This trend is something investors cannot ignore. Annual ESG fund flows in Europe increased from £45 billion to around £108 billion from 2018 to 2019. You may think with Covid-19 taking the limelight in 2020 the demand for environmental and social problems was overlooked. On the contrary, the pandemic has highlighted how environmental and social problems cannot be solved by individual government policies. Businesses and the financial sector have a responsibility to make positive change too. 

What counts as ESG investing?

ESG investing covers any investment that has a positive social impact. A company is judged against an ESG criteria to screen how ethical the investment is. Certain companies are blacklisted, for example those that work with tobacco, gambling or arms. 

The idea is that those companies that practice strong ethics are determined to make better investments as they are contributing to a positive social outcome. 

Does ESG investing make bigger profits?

When people invest, they do it to protect and grow their wealth so ESG has to at least match other investment opportunities to get investors interested. Sadly, money still takes the number one spot on the priority list of most investors. 

In the past there has been a perceived performance trade-off but is something of a fallacy today. One research paper on ESG investing found that, in the first four months of 2020, “more than 70% of funds focused on ESG investments outperformed their counterparts.” Similarly, “nearly 60% of ESG funds outperformed the wider market over the past decade.” Although ESG is not a concrete win win it is certainly turning the tables to outperform traditional investment options. 

What issues come with ESG investing?

One of the biggest problems is determining the ESG definition. What counts as sustainable, green, or ethical enough? Funds try to include these buzzwords to encourage more investors but you should really do your research to check these companies aren’t pulling the wool over your eyes. Money’s report found that only 35% of people feel confident defining ‘sustainable’, while only 18% felt confident with ‘ESG’. 

Thee has been moves to overcome this, like the standardisation drive led by the Investment Association. In November 2019, it launched a responsible investment framework that aimed to standardise terms like ‘ESG integration’, ‘sustainability focus’ and ‘impact investing’.

Top Performers

Royal London’s Sustainable Leaders fund was the top performing UK ethical fund over the past 10 years giving an almost 200% return, according to AJ Bell.

Source: Financial Times

Investing in the UK has to be done carefully. The FTSE 100 is heavily dominated to the enrtgy sector that has less than ethical values.

“It’s a concentrated index and the biggest firms are massive oil companies,” says Jack Turner, investment manager at 7IM. “When you remove BP (BP.)Royal Dutch Shell (RDSB) and Diageo (DGE) you quite quickly build up a strong tracking error without taking a view.”

The bottom line is that ESG is something investors will increasingly consider making a part of their portfolio. From both an ethical and a growth standpoint, the development of socially and environmentally responsible investing is encouraging, making it increasingly difficult to ignore. If you’re ready to invest, we recommend eToro and easyMarkets for beginners. 

Why you should buy BAE Systems now.

BAE Systems (LSE: BA) is a winning income stock with a dividend yield of 4.5%, however, over the last 12 months the shares have moved -22.3% relative to the wider market. Will 2 big new contracts push BAE Systems’ share price into the black?

So why is BAE Systems so great?

BAE Systems is the leading British security and defence company that handles £1.3billion contracts over the past half a decade. What is making them extra hot right now is two new contracts with the Ministry of Defence. 

BAE Systems is a pretty safe investment due to its colossal size. The company has a market valuation of over £1 billion on the LSE with a current market capitalisation of around £16 million. 

The defence industry is highly regulated and controlled so only a few companies effectively control the market. BAE Systems is by far the largest in the UK and one of the top five weapons producers in the world. Its sales are double that of its closest European competitor, Airbus Group. Also, the company also has unrivalled experience in specific sectors, such as shipbuilding.

Limits to their success

BAE Systems’ stock was trading at GBX 539 in March 2020 when the coronavirus pandemic began. Since then, BA shares have decreased by 2.3% and is now trading at GBX 526.80.


Although things are looking good, there is one thing to watch out for… With the pandemic taking its toll on the UK’s public finances there is almost definitely going to be a cut in defence spending which will affect BAE Systems performance as they have such close ties to the Ministry of Defence. 

With ESG investing becoming more important than ever, BAE Systems might be in some trouble. Their dealings supplying arms to Saudia Arabia is far from the socially responsible image that companies nowadays need to uphold to guarantee safe investment. If investors avoid BAE Systems then their share price might enter rough waters. 

Should you buy?

Overall, the company provides a solid return for investors and are unlikely to be largely affected by these risks. 

Although it’s hard to see how uncertain economic conditions will affect the stock’s future performance, we can trust analysts to make well-placed market predictions. 

The current consensus among 20 polled investment analysts is to buy stock in BAE Systems PLC. 

Price Forecast

According to analysts’ consensus price target of GBX 596.56, BAE Systems has a forecasted upside of 13.2% from its current price of GBX 526.80. 11 analysts have issued 1 year price objectives for BAE Systems’ stock ranging from GBX 511 to GBX 660 to give an average of GBX 596.56 in the next twelve months. This suggests a possible upside of 13.2% from the stock’s current price.


BAE Systems, a great income stock

BAE Systems is a great income stock offering a dividend yield of 4.5% and a dividend cover of 1.25. 

BAE Systems pays an annual dividend of GBX 24 per share and currently has a dividend yield of 4.64%. BA has a dividend yield higher than 75% of all dividend-paying stocks, making it a leading dividend payer. The dividend payout ratio of BAE Systems is 59.26%. This payout ratio is at a healthy, sustainable level, below 75%.

With an annual growth of 13.2% and a dividend yield of 4.5%, BAE Systems is a great stock to invest in. If you’re ready to invest, we recommend eToro and easyMarkets for beginners. 

How badly has Brexit screwed the UK economy?

Three months after the UK officially left the EU the effect on the economy is worse than expected. Trade problems with Europe and the prevailing coronavirus pandemic are really taking their toll. So how bad is the UK economy?

Boris Johnson has supported Brexit throughout the transition claiming it would allow Britain to regain control of its laws, borders and fisheries. However, closing off the UK economy will break down supply chains that have taken decades to form. Although the EU is only a small and ever decreasing portion of world GDP,  it made up nearly half of UK trade. Can the UK make up for this by trading further afield?

Critics say it will be difficult to make up for lost trade with other countries. Uk exports to the EU dropped by 40.7% (~£5.6 billion) in January following Brexit and another COVID lockdown, this produced the biggest monthly decline in trade in over 20 years. Markedly, French, German and Italian  data shows a 20% decline in imports from the UK in January as trade frictions were introduced.

UK exports to the EU fell by more than 40% in January
Source: Guardian

The implications of Brexit reach beyond trade, only 1 in 10 manufacturers said they were prepared for the end of the transition period. Although considering the global pandemic going on, the ‘Brexit effect’ might be more than  expected. 

Manufacturing should gradually recover throughout 2021, helped by new tax incentives which allows businesses to offset 130% of new machinery/equipment. This incentive should hopefully bring some big investment into UK manufacturing. 

So what will the economy look like?

In the short term, things will get harder as the transition period ends. Full customs processes will be phased in between April and July facing big challenges to UK imports. Politically, the UK’s decision to extend the grace period on goods from Northern Ireland has damaged UK-EU relations. This might pose a knock on effect long-term on firms that face severe bureaucratic problems. 

Overall, the Brexit transition will cause a 0.5% hit on UK GDP in the first quarter of 2021.  However, longer term, Brexit will reduce GDP by 6.4% at the annual rate of 0.5%.

If you are still unsure about the effect of Brexit on the UK economy, look at the summary below.

Despite the political and economic challenges of Brexit, the UK’s economic growth is positive. The UK is set to outpace leading EU countries such as Germany, France and Italy, accounting the effects of Brexit. The World in 2050 report forecasts that by 2050, the UK will have fallen by just one place from 9th to 10th in global economy rankings. The UK economy is set to grow at 1.9% annually.

Now you have the rundown on the future of the British economy, do you think it’s safe to invest? If you want to invest, we recommend eToro and easyMarkets for beginners.