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.

https://www.hl.co.uk/shares/shares-search-results/b/bae-systems-plc-ordinary-2.5p

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.

https://walletinvestor.com/lse-stock-forecast/ba-stock-prediction

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. 

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. 

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. 

How pandemics affect stock markets | A historical view

There have long been large reaching health crises across the globe which have affected local economies, but only recently due to globalisation have we seen pandemics that have damaged global financial markets. Here we look into a history of pandemics and their effect on the stock markets, has COVID had the biggest impact relative to other pandemics?

As globalisation emerged and disease could spread far and wide so followed the negative economic effects. 

Graph from Yahoo Finance

Asian Flu

1957-1958 | 1-2 million dead

The US had the biggest focused effect of the Aisan FLu crisis. The first wave affected school children which coincided with an economic recession. The Dow Jones Industrials Average dropped 19.4% from summer to autumn of 1957. This event caused political tensions over the integration of public schools and the coming Cold War.

SARS

2003 | 774 dead

The Severe Acute Respiratory Syndrome (SARS) outbreak was a well managed disease outbreak wth only 8,098 people affected worldwide, mainly in China and Hong Kong. There was a few months delay between the break out in Nov, 2002, in March 2003 the S&P 500 had dropped 12.8%. 

The SARS outbreak saw IT, finance and communication services as the biggest losers worldwide with retail, travel and leisure suffering most in China. Overall, the world GDP took a 0.1% hit from the SARS outbreak. 

Ebola

2013-2016 | 11,310 dead

The Ebola epidemic was centred around Guinea, Liberia and Sierra Leone in West Africa. The greatest hit industry were airlines, cruises and hotels (as to be expected) with shares in American Airlines dropping 20% in a few days after news broke that an Ebola positive customer flew. Whilst service industries suffered, pharmaceuticals boosted. Tekmira Pharmaceuticals rocketed 200% over 2014. 

COVID-19

2020-ongoing | 2.8 million dead (Mar 21)

The global coronavirus pandemic is one of the largest health catastrophics of all time with far reaching socioeconomic consequences. Almost all countries are expected to enter into recession as a consequence of the pandemic. The World Bank predicts a 5.2% contraction in global GDP. If we look directly at stock markets, we can see the S&P 500 dropped 31% in March 2020 before recovering 12%. Stock performance has been rocky across the pandemic with extremely high volatility across the board. 

Most large indexes including FTSE, Dow Jones Industrial Average and the Nikkei saw massive drops as t Covid-19 cases soared over spring. 

The major Asian and US stock markets have since recovered following the announcement of the first vaccine in November, but interestingly the FTSE is still is overall negative since the pandemic began.

So what have we learnt… That disease outbreaks really mess with the global economy. But to look closer at it, we can see that the greatest hit industries are travel and services but these also make the greatest recoveries. We can also see medical and pharmaceutical providers are by far the biggest beneficiaries of these disease events. 

Looking to invest? We recommend eToro and easyMarkets for beginners. 

Boohoo Shares | Time to buy?

Boohoo (BOO) shares dropped after a scandal broker finding poor working conditions for factory workers in Leicester. Will Boohoo’s attempt to repair their reputation by improving worker conditions and offering the public greater transparency see a recovery of the fashion retailer’s share price?

Boohoo has just announced they will cut more than 400 firms from their supply chain following allegations of poor treatment of factory workers. 

The fashion retailer is trying to repair its reputation after claims of poor working conditions and low pay for workers in one of their supplier factories in Leicester. It was said that some workers received as little as £3.50 per hour and there was no protection against the virus available. An inspection found workers’ health was at risk due to finding locked fire doors, unsanitary toilets and no proper drinking water. 

Their attempt to remedy serious issues in their supply chain will include working with 78 approved suppliers across 100 factories that ensure respecting staff and to hold a new policy of greater transparency. 

The scandal wiped £1 billion off Boohoo’s share price in just two days. Other retailers such as Next and Asos also removed Boohoo products from their ecommerce sites. Share prices have already lifted 2% in reaction. 

Chart from Yahoo Finance

Boohoo’s share price grew 15% over 2020 as shoppers turned to the online clothing retailer during the pandemic. Despite this growth, Boohoo’s rival ASOS grew an incredible 42%, perhaps due to the saftey of the comapny’s larger market share.

Should I buy?

Analysts recommend BUYing Boohoo due to its huge market potential and safe business model of online sales. 

Yahoo Finance

Price Forecast

On the four-hour chart, we see that the BOO share price found a substantial resistance at 376.5p, where it formed a double-top pattern. A double-top is usually a bearish sign. The stock then dropped to 310p last week and is currently consolidating in this range. It is also slightly below the 25-period and 15-period exponential moving averages. 

Therefore, in my view, while the overall trend is bullish, there is a possibility of more weakness in the near term because of the negative headlines. However, a move above 360p will invalidate this prediction.

Analysts at Berenberg believes that the stock could rise to 460p, which is 27% above the current level. They said:

“We believe the company is making progress in implementing the near-term recommended improvements that can reduce the risk of pervasive issues in the future, but we also believe more can – and should – be done,”

Boohoo’s efforts to repair its reputation will surely boost its share price. Will you buy?

How to invest for Millennials

This guide will walk you through the best ways to invest as a millennial. Time is the biggest thing you have to your advantage as investing as a millennial, so the sooner your start investing, the more wealth you can accrue over time. 

Millennials are people born between 1981 to 1996, dates now clarified by the Pew Research Center. Millennials were named because they welcomed in the turn of the millennium and came of age during the boom of the digital world. If you’re a millennial, digital native or just want to learn more about investing, we welcome you. This isn’t just for those in they’re twenties but can be applied to anyone who is anywhere from 18 to 40!

The problems millennials face

Millennials face the most uncertain economic future since the Great Depression with a massive 15% of those in their early twenties unemployed, compared to the average 7-9%. As a result of decreased labour mobility millennials are stuck in a stage of stagnation. When there is less movement between job to job or even across different areas employers gain the power to negotiate and limit wage increases – a phenomenon called monopsony. Starting off with low earnings compounds, making it harder to save and invest for your future. 

Starting off with less household income relative to older generations, living expenses can take their toll. Not only in a more sluggish job market do millennials tend to invest more time and money in getting higher education and further degrees but entry level jobs are more competitive and are at the bottom of the pay scale. 

Becoming financially independent is hard. You can gain independence by being frugal or through income, growing wealth overall will make the difference and you’ll be thanking yourself for investing long-term. Broadening your income horizons through education or work experience is the route to becoming more financially independent. 

All these things add–up to greater debts and less way to repay them. Some feel that paying off their student debts will be a weight off their shoulders, but this isn’t the smartest move. Student-loan repayments does not make your money work for you, and if you’re in the UK then you are only required to repay 9% of your income once you reach the repayment threshold (£26,575 pa). Furthermore if you don’t manage to repay your outstanding loan balance over 30 years then your debt will be cancelled!  

Another thing to add to the list is the shocking interest rates out there. Older generations could deposit their money in a savings account with their bank and with a steady rate of interest build wealth over time. But now with interest rates at an all time low there is little point holding a savings account. Especially with the UK government threatening negative interest rates meaning you will actually lose money by holding it in a bank! In 1990 (around the time your parents probably started investing) banks offered 14% interest, yet since the financial crash wrecked the economy in 2008 interest rates have been around just 0.5%. Remember there is no point putting money in a savings account that has an interest rate lower than inflation. 

Saving for retirement is getting harder and harder. Also 70% of people surveyed believed as retirees they’ll be able to survive on $36,000 a year. This is a huge problem is that in 2018, the average yearly expenses for those ages 65 to 74 were $56,268 a year, according to the Bureau of Labor Statistics and with inflation and cost of living only going up, this could end millennials in a sticky situation. 

So do Millennials invest?

A Bankrate survey found that only 33% of people under 30 owned stocks in 2016 due to lack of funds. However, since lockdown there has been a huge increase in interest in investing in stock markets from young people. With return rates hovering in the 10% range and those who start investing young benefitting from compound growth. It really is a must!

Why choose ETFs

Get a brokerage account to buy stock – a fractional ownership of a business. The outcome of your investment relies on how that business does, you will get positive investment returns if you invest smart! Buying individual stocks takes a lot of time and research so it might be better to invest in ETFs which allows you to diversify and reap long-term rewards that are stable and reliable. 

If you are just starting out the single most important thing to do is to control your emotions. Investing in an ETF allows you to own stock across the stock market. Losing money is part of investing so being able to cope with loss will teach you how to stick with the long-term. You can buy an ETF for a specific industry for example, tech, green energy or gold. For example if you invest in the FTSE 100. 

ETFs were created to disrupt the success of mutual funds. Although they are similar, a mutual fund is taxed on any capital gains whereas on an ETF you will only be taxed once at the point you sell your stocks. ETFs are also typically cheaper so can give you a headstart if you’re a new investor.

To invest in an ETF, you will need to open an account with a broker to manage your investments. If you’re just starting out we recommend eToro and easyMarkets for their easy to use interfaces and fee – free trading.

Bonds

Bonds are different from a stock, this way you are instead loaning money to that company so they can invest in their business. Over a period of time, the company pays you interest e.g. quarterly, which acts as profit. If the company is failing and cannot pay back their debts then you lose out. 

There are some government backed bonds which are “risk-free”, essentially a government won’t default or fail meaning your investment is safe. 

Now you know a few of the best ways to invest as a Millennial you can start putting your money to work, we recommend eToro and easyMarkets for beginners. 

Trading 101: Micro-cap Stocks

Micro-cap companies are those with a very small market capitalisation and tend to overlap with penny stocks. They have a lot of potential but also carry high risk. Read on to check out our top micro-cap stock picks. 

A micro-cap company can be defined as one publicly-traded market capitalisation between approximately $50 million and $300 million. They fit below small cap companies and above nano caps. 

As micro-caps have little capital to support them they tend to have greater volatility and therefore greater risk than larger-cap stocks. Their small shareholder base and lack of liquidity make them high risk. Although with higher risk, comes higher reward. For example, from 2008 to 2018, the Dow Jones Select Micro-Cap Index returned an annualized 11.6%, while the S&P 500 Index returned an annualized 10.37%.

Is the risk worth it?

As there is a higher risk associated with micro-cap stocks than typical stocks it is advised that you set a stop-loss order and fully understand the price you want to enter and exit the trade at. Micro-cap stocks are high-risk investments, so while it is possible to benefit from explosive gains there is also the potential for you to lose money. 

Photo by Karolina Grabowska on Pexels.com

Here are some reasons why micro-cap stocks are risky:

  • Private records mean the public have a lack of information to use to consider buying micro-cap stocks as these companies are not required to file financial statements with the SEC – who regulate markets. 
  • No minimum standards means micro-cap stocks can be listed on OTC exchanges no matter their performance. Needless to say this makes investing in this type of stock risky. 
  • Low liquidity is inherent to micro-cap stocks as they are not traded frequently. This opens up the opportunity of fraud as traders can manipulate prices.

Before you invest in micro-cap stocks, you will need to open an account with a broker to manage your investments. 

Choosing the best online stock broker can make the difference from an easy and exciting new experience to  constant frustration and disappointment. Accessing financial markets through online brokers is easy and inexpensive but there are so many out there tailored to a different sort of customer so choose the right broker that will optimise your user experience and profits. 

If you’re just starting out we recommend eToro and easyMarkets for their easy to use interfaces and fee – free trading.

Our pick of micro-cap stocks

Foxtons (FOXT) is a London based estate agent that should see a boost with the property market rebounding. The company is on a good track with performance improving throughout the pandemic. 

Abercrombie & Fitch Company (ANF) is a clothing retailer that has seen a 150% growth in stock price since March 2020. 

McBride (MCB) is a UK manufacturing firm that labels products. Shares have increased over 40% since 2019, this sort of growth is set to continue past the end the pandemic with their global expansion plans. 

Alumsac (ALU) is a sustainable building materials producer offering a generous 5.4% dividend yield. With a market capitalisation at £61.7m and analysts rating it as undervalued, you’d be a fool not to invest. 

Will you be investing in micro-cap stocks? Their greater annualised return is worth the higher risk for some. If you are ready to invest, we recommend eToro and easyMarkets for beginners.

7 Passive Income Streams | Make money while you sleep

If you’ve got a steady paycheck but want to earn a little extra on the side why not try one of our top 7 passive income ideas. This way you can truly make money while you sleep.

Passive income is making money for no extra effort. By investing up front you can receive money on an ongoing basis. This is different from Active income which is where you actively swap your time and effort for income which would be a 9-5 job. 

  1. Dividends

Invest in stocks and shares that pay dividends. When a company makes a profit they give a little bit of money to you . Some companies are renowned for paying better dividends than others. There is an added bonus investing in growth stocks as while you invest at the start and get a little bit every now and then the total value of the asset will increase over the period you hold it, so when you are ready to sell you will get a lump sum as a bonus to the dividends to gain whilst you are still holding the asset. 

  1. Vanguard Investments

They have a series of low cost trackers and index funds that can invest your money. They track performance of global stock markets with specific indices for your interests. You can invest initially and then leave them to make you money in the background. Vanguard charges a small fee for managing your account and are much better than the industry average. You can also gain from dividends, companies that payout will be reinvested into your account to compound your investment. 

  1. Company stocks

If you sign a new contract try asking for shares in the company. While this is not often openly offered by most hiring firms it can be a great way to earn passive income. Often the company you work for will give you a great buy in rate or even through in some shares for free as part of your signing package. So whilst you work your 9 to 5 you can rest assured knowing that you are building wealth through company growth stocks. Not only does this earn you a bit of passive income but it also incentivises you to work harder!

To benefit from Dividends, Vanguard Investments or Company Stocks, you will need to open an account with a broker to manage your investments. 

Choosing the best online stock broker can make the difference from an easy and exciting new experience to  constant frustration and disappointment. Accessing financial markets through online brokers is easy and inexpensive but there are so many out there tailored to a different sort of customer so choose the right broker that will optimise your user experience and profits. 

If you’re just starting out we recommend eToro and easyMarkets for their easy to use interfaces and fee – free trading.

  1. Royalties

Graphics, music, programming, red bubble. If the company continues to be successful or grows you can opt to choose to receive small amounts of money depending on the success of your product rather than taking a flat fee .

  1. Credit Card Cashback

Using cash or debit cards simply hands over your money without benefiting you. But a credit card can be used to pay for pretty much any transaction, food, bills etc. with the hopes that the customer wont pay back the full amount at the end of the month and then can therefore charge interest. But if you pay back your credit card bill in full, you are losing nothing and could benefit from a cashback scheme. You will get rewarded at a percentage, usually 0.25 – 2% for every pound you spend, therefore acting as a great passive income stream as your money is doing the work for you. But make sure you are disciplined and are not just paying more because you are excited by the cashback and are able to pay back your credit card in full by the end of each month. 

  1. Rent

Although a more serious option, in terms of investment and time and energy to organise, renting out property is a highly profitable passive income stream. You can earn anywhere from 0 – 15 % return on your investment depending on costs of maintenance and landlords etc. It is also a great growth asset which should increase in value over time so if there was a time where you wanted a large lump sum of money then you could sell the property. Remember renting out property is a complex and time-consuming matter and isn’t for the faint of heart or for people who want to withdraw their investment quickly and easily. It also only makes you money when you have tenants! 

  1. Host Airbnb

If owning a property and charging rent seems a little too much hassle then why not informally rent as a host on Airbnb. List your home or spare room on Airbnb when you aren’t using it and charge £50+ per night with little effort. 

Passive income can really help create security and supplement your earnings. The work that goes into earning passive income is manageable alongside your 9 to 5. If you are ready to invest, we recommend eToro and easyMarkets for beginners. 

Can Royal Mail keep up? Stock Analysis

Royal Mail PLC (RMG) have announced they will introduce Sunday parcel deliveries nationwide in the efforts to keep up with Amazon. Will this keep their share price bullish when lockdown ends?

From next month, Royal Mail will deliver parcels across the UK seven days a week in response to the high demand of online shopping over the pandemic. The service will allow customers to specifically request delivery on Sundays from retailers who use Royal Mail.

Royal Mail is making efforts to future proof their service with new CEO Simon Thompson making that his focus. He also aims to maintain good relations with trade unions. One of his first moves was to broker an agreement with the CMU on the employee pension scheme and cut the working week by 1 hour which could save £225 million per year. And when the company saves, the investor gains.

The Royal Mail share price has risen by 175% since September 2020. While share price increases were expected from the start of the pandemic last spring due to a surge in parcel volumes, the company has surprised analysts with the rate of recent gains. RMG has certainly made a comeback following a slow decline in share price over recent years.

Chart from Shares Magazine

In Q4 of 2020, Royal Mail delivered 496 million parcels, which is an all-time record for the company. The consumer shift towards e-commerce and online shopping has resulted in a massive increase in parcel delivery whilst a 14% decline in letter delivery over Q4 was found. To keep up with demand, Royal Mail has kept on 10,000 of the 33,000 temporary staff hired to cover the hectic festive season suggesting things are looking up.

An estimated profit of £500 million in 2020 equates to an outstanding 78% year-on-year growth rate. 

Graphic from The Financial Times

Buy or Sell?

The Financial Times’ analysts saw RMG as an outperformer. The outperform rating means the company will produce a better rate of return than similar companies but is not the best stock out there in the industry. 

Before you invest in RMG, you will need to open an account with a broker to manage your investments. 

Choosing the best online stock broker can make the difference from an easy and exciting new experience to  constant frustration and disappointment. Accessing financial markets through online brokers is easy and inexpensive but there are so many out there tailored to a different sort of customer so choose the right broker that will optimise your user experience and profits. 

If you’re just starting out we recommend eToro and easyMarkets for their easy to use interfaces and fee – free trading.

Price Forecast

Over a year, the Royal Mail stock price are expected to fall slightly. The 15 analysts offering 12 month price targets for Royal Mail PLC have a median target of 480.00, with a high estimate of 708.00 and a low estimate of 284.00. The median estimate represents a -3.13% decrease from the last price of 495.50.

Graphic from The Financial Times

If you are interested in dividends it doesn’t look good. In 2020, Royal Mail PLC reported a dividend of 0.08 GBP, which represents a 70.00% decrease from last year. The 9 analysts covering the company expect dividends of 0.05 GBP for the upcoming fiscal year, a decrease of 40.00%.

With the pandemic coming to a close, will online shopping produce enough parcels for Royal Mail to stay bullish? If you are ready to invest, we recommend eToro and easyMarkets for beginners.