economic growth in the United States

The Advantages of Investing With a Strong U.S. Dollar

Over the past year, the United States dollar rose 9 percent compared to the Euro. These are the first major, positive movements of the dollar, since the economic crash in 2008. The rise in the value of the dollar is also the best sign for a positive recovery in the United States. That being said, some market analysts believe that a rising dollar is a sign that investors should shift their investment portfolio’s focus to more appealing investments that will, maximize gains and earn a steady return.

Throughout this blog post, I will guide you through some of the best investment opportunities, based on the strengthening of the U.S. dollar. Please be mindful that these ideas are based upon current economic conditions, and not a guarantee of future success.

What should you invest in now?

Given that the U.S. economy is growing stronger than analysts expected, the long-term outlook shows real promise in three particular areas: shipping, manufacturing and gold.

  1. Shipping- A strong dollar means that goods will be cheaper in the United States. This translates into additional shipping. For the first time in almost a decade, the United States dollar is trending in the right direction. Investing in the shipping containers that deliver economic prosperity around the world, is a great way to profit from economic growth and the strength of the dollar. With all of the established and proposed container shipping alliances, the major shipping companies will be turning a profit as container prices rise and expenses fall.
  2. Manufacturing- The reason why the dollar is stronger is because of a 4.6 percent growth in GDP in 2014. Instead of looking solely at the dollar, consider the economics behind this movement. Who benefits the most from a strong dollar and economy? The answer is manufacturers. Look at the earnings of manufacturers, if you have an interest in investing in the manufacturing companies that are benefiting from a stronger consumer base.
  3. Short Gold- Over the past 10 years gold has risen to as high as $1900 per ounce. Currently, the precious metal sits at $1220 per ounce. Using ETF funds, you might want to short gold as the price continues to drop. Since the U.S. dollar is loosely based upon the price of gold, when the dollar gains, this precious metal loses value.

The Future of the Dollar.

Over the next year [2015], the American dollar is expected to continue to rise steadily, even as Europe continues to be challenged by debt and China’s booming economy begins to slow. This means that investing now, while the dollar is strong, is regarded by some investors as a good long-term investment strategy, that will endure obstacles in future markets and produce above-average returns.

money for investing in investment

What Can Alternative Investments Offer Young Investors?

The vast majority of 18 to 25 year-old investors have limited funds and are not likely to have gobs of spare cash stacked about for investing. Yet disillusioned by mainstream savings products, young investors are branching out into alternative investments and finding their way among the predominantly middle-class space, through equity crowd-funding, peer-to-peer (P2P) lending and other non-traditional options for investment.

The draw which equity crowd-funding pulls from many young investors is their need to make decisions based on having low startup funds. With crowd-funding, there is an extremely low minimum investment demand, and FCA regulations even state that retail investors may pump no less than 10 percent of their investible assets into equity crowd-funding. Young investors would be wise to be prepared for the worst to happen though, given that there is no guarantee of return on investment, or recovery of principle in startup investing.

The most alluring opportunity for young people is in social platform direct lending, known as peer-to-peer (P2P) lending, because the returns can out-perform traditional investments by 3 percent to 15 percent per annum, depending on the platform. As with all P2P platforms, investors could lose everything because there is no FSCS protection, but the markedly higher return is often enough to warrant such risk-taking.

With provision funds in place, many platforms can recoup losses in the event that an underlying borrower should default. However, it’s difficult to determine whether contingency funds will be able to withstand effects of rising inflation or a recession. Rupert Taylor (director of AltFi) recently explained that younger loans are less likely to default, and so the quality of a particular platform’s lending is uncertain until they are more mature. Even still, 2014 has proved to be a period of enormous growth for the industry of alternative finance and with growing support, has a trajectory of exponential growth.