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Rick Lover

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The Bitcoin industry is suffering from the recent price turbulence. Professional investors lament the loss of a “safe haven” – crypto enthusiasts sense new opportunities.

What do Bitcoin and toilet paper have in common? If you believe the net community, both are assets – and toilet paper rolls are the more lucrative ones in the Corona crisis. At least, that’s what it says in a post making the rounds on Twitter and online forums right now: “Toilet paper is the new Bitcoin!”

The trigger was probably the story of an Australian who, faced with empty supermarkets, auctioned off a roll of toilet paper on Ebay. He quoted $1,000 as the price to illustrate the absurdity of the offer. Then it happened: the roll of Woolworths toilet paper actually found a buyer, as the Australian television station “Seven News” reported.

Behind the episode, however, lies a fundamental insight: Bitcoin is not the “safe haven,” the “digital gold” that many in the scene had recently declared it to be. The virtual currency is not suitable as a stable store of value in times of crisis, as the recent price crash shows.

This has consequences for the crypto industry, for private investors, but also for institutional investors. The future of the crypto world – it is facing a reassessment because of the Corona crisis.

This is already shown by the recent turbulence: In the past week and a half, the price of the most important cryptocurrency has collapsed by almost half, from just under 8,000 dollars to around 4,500 dollars, as data from the analysis firm Coinmarketcap show. Bitcoin was thus at its lowest level since April 2019. Since Thursday, it has been on the rise again: on Friday, it was quoted at around 6,600 dollars, a full 22 percent up, but still far from the 10,000 dollars in mid-February.

Other virtual currencies also zigzagged: the second-largest currency Ethereum fell by double-digit percentages in the Corona crisis, then was up on Friday. Ripple, Bitcoin Cash or Litecoin also showed similar developments. Analogous to conventional asset classes such as stocks, oil and corporate bonds, it went down significantly in the meantime, only gold did better (see chart).

The end of “digital gold
Apparently, Bitcoin and Co. are more vulnerable in the Corona crisis than thought. “Despite the sharp drop in price, Bitcoin has failed to attract investors,” admitted Naeem Aslan, market analyst at online broker Ava Trade after the crash. He expects the price to fall further: “To me, anything below $3500 is very attractive.”

“Bitcoin is a risky asset,” also said an employee of a major crypto startup in New York, who prefers not to see his name in print. “And right now, all the risky assets are just being sold.”

With the price turbulence of digital currencies, their status as “digital gold,” a “safe haven” in times of crisis, as dreamed of by observers, has become a distant memory. In the past, crypto enthusiasts had argued that the virtual coins represented a revolutionary asset class that was increasingly decoupled from developments on the financial markets. There is now no talk of that.

As an analysis of the industry portal BTC-Echo shows, bitcoin recently correlated more strongly again with classic asset classes and indices such as the Dax – and also gave a significantly worse picture here than the gold price, which is still more independent in comparison. “Digital gold has not secured investors’ deposits, and it doesn’t look like an uncorrelated digital asset either if the price is striving downwards in step with all classic markets,” chief analyst Philipp Giese sums up.

What is the reason for this development? Scene insiders blame the entry of institutional investors via futures and other instruments for the higher volatility.

Fickle professional investors.
“Bitcoin increasingly appeared in the portfolios of professional investors and funds in the last two to three years,” explains Christoph Bergmann, operator of the industry website Bitcoinblog and one of the most prominent experts on the scene. “They have bought cryptocurrencies because they hoped to have found a safe haven. At the same time, they are even more inexperienced with virtual assets and sell more quickly than convinced crypto investors when faced with uncertainty.” As a result, “The very institutional investors the scene has long so desired are bringing uncertainty into play.”

In the Corona crisis, he said, many retail investors also bailed out as a result, triggering a cascade of sell orders. Will the zigzag course continue like this? Bergmann reassures: “The panic will certainly subside again.” Private investors are already getting back in, he said, while institutional investors continue to sell. “If bank loans burst, states have to finance short-time work and central banks print new money, then private investors in particular will look for investments like Bitcoin.”

The fact that especially convinced crypto fans are already using the cheaper prices to buy more can be seen, for example, in the growth of corresponding Google searches. A survey by the Berlin-based crypto bank Bitwala, which is active in 32 countries with over 50,000 registered users, also suggests this conclusion.

According to the report, three out of four Bitwala customers bought Bitcoin instead of selling it in the past crisis days, during which the Fed, among others, drastically lowered the key interest rate. Transaction volume rose to a record high. “The current actions taken by the Federal Reserve are a Band-Aid in uncertain times. Nevertheless, many fear that continued money printing by governments and central banks in response to the crisis will sooner or later lead to the erosion of government-backed currencies,” Bitwala CEO Ben Jones said.

Many diehard crypto fans therefore “prefer non-corruptible Bitcoin to the uncertain monetary implications during the crisis,” he interpreted. “The response from our customers also signals hope in times of global crisis that we need Bitcoin in a new, connected future to exchange digital assets over the web.”

Fluctuating Stable Coins
Not everyone is so optimistic, especially in the U.S. crypto scene. Here, a whole new industry has emerged in response to bitcoin’s arrival in the financial mainstream: It is grouped under the buzzword “Decentralized Financial System” (DeFi). DeFi, like bitcoin, is based on the database technology blockchain, but complements its vision with automatically running digital contracts called smart contracts.

Growing largely unsupervised in 2019, DeFi now represents a kind of shadow Wall Street. So-called stable coins, cryptocurrencies with stable value, whose idea Facebook wants to copy with its Libra Coin, play a central role in this system. DeFi startups issue loans backed by these virtual coins. And sophisticated crypto exchanges are organizing themselves, in some cases, in a completely decentralized manner. Overseers like Bank of England Deputy Governor Jon Cunliffe are watching the new coins closely and want to enforce the rules that apply to conventional money on them as well (see interview).

For fans of Bitcoin’s original vision of creating a financial system “from below” that breaks with the power of traditional banks, DeFi is enticing. But even the latest incarnation of the crypto idea has faced serious difficulties from the recent price turmoil. The system is proving particularly vulnerable in a crisis: for example, DAI, the stablecoin from the startup Maker, which is actually strictly pegged to the dollar, ran into severe turbulence last week. At times, one DAI was worth significantly more and significantly less than one dollar. And other well-known stablecoins, such as Tether, had similar problems.

The turbulence comes at an inopportune time. For years, the crypto industry has been hoping for a return to the good old days, when major currencies kept hitting new record highs. But it doesn’t look like that at the moment – Corona crash or not.

For example, Consensys, a well-known U.S. startup that aims to expand the Ethereum ecosystem, has recently had to repeatedly cut jobs and change its strategy. Now the company is betting on a collaboration with banking giant JP Morgan Chase, among others. That promises steady returns – and is meeting fierce resistance. The scene’s ambitions to replace Wall Street have suffered a reality shock.

“Halving” ahead.
Will bitcoin and other major crypto coins persist well below previous highs after the Corona shock? Or is there a prospect of a renewed price rally? Observers are pinning hope on the so-called “halving event” coming up in May. This is understood to mean a change in the Bitcoin algorithm that tightens the supply. The mysterious creator Satoshi Nakamoto had programmed in an upper limit of 21 million Bitcoin to prevent inflation. 18.2 million have already been produced.

New Bitcoin are received by the network’s accountants, the producers for their computationally and thus power-intensive maintenance of the Bitcoin blockchain. Until now, the “miners” have been credited with 12.5 Bitcoin for each new data block added. In the future, it will only be 6.25 bitcoin. So, since the supply is falling drastically, optimists expect a rally.

The “stock to flow” model is particularly popular in the scene: this simple calculation model assumes that abrupt drops in Bitcoin supply will directly drive the price under constant conditions. For 2021, some analysts expect a bitcoin price of 100,000 dollars on this basis – and let investors dream.

Other observers are much more sober. Crypto-blogger Bergmann, for example, sees an effect of the “halving”. Analogous to the curbing of oil production by Opec, it will reduce selling pressure in the long term, i.e. it will have a price-driving effect. But: “In the past, halving was often a non-event because it was already priced into the price. It could pale in comparison to other factors. I wouldn’t bet on us seeing a new all-time high anytime soon.”

Bergmann believes it is an aberration that the idea of a “safe haven” has become so dominant in the debate about bitcoin’s future. This focus, he says, has led to virtual coins being on the retreat as an everyday means of payment. And that very thing, he said, is harmful to the entire crypto scene in the long run. “Bitcoin is thus turning from a global currency into a niche asset,” Bergmann concludes.

Most recently, even pioneers such as computer manufacturer Dell, which introduced Bitcoin payments in 2014, had cancelled this option again. Enthusiasts see this as the real problem. If the Corona crisis puts a damper on the dream of “digital gold,” then, they hope, there could be room again in the crypto world for the original vision.

Crypto Exchange Binance has completed the quarterly burning of BNB, burning a total of 1,099,888 Binance Coin (BNB) worth $595,314,380.

With the recent explosion of BNBThe total supply of this coin has officially dropped from 170,532,825 BNB to 169,432,937 BNB. This 15th quarterly BNB burn has the highest value ever converted to USD.

Binance’s quarterly burning of BNB aims to reduce the supply with the expectation that the scarcity of BNB will help it increase in value in the future. In its official report, Binance said that to burn BNB, they used 20% of their profit to buy back BNB on the open market and burn them up to 50% of the supply.

Speaking of coin burning this time, Changpeng ZhaoThe CEO of Binance said:

“BNB is the base currency of Binance chain và B. BNB use cases have been extended to hundreds of applications on multiple platforms and projects in the cryptocurrency ecosystem. BNB is used to pay transaction fees on Binance.com, Binance DEX, Binance Chain and BSC. “

“BNB is also used on many DeFi platforms that are based on BSC and offer financial payment solutions. With the remarkable development of BSC, it will attract more and more people to use BNB, and as it has more and more utilities and is widely used, its value will increase in the future. “

In the first quarter 1 Binance transaction volume and users recorded a growth of 260% and 346%, respectively, while the total market capitalization of cryptocurrencies recently exceeded USD 2 trillion.

This shows that the adoption of cryptocurrencies is increasing from individuals to large institutions.

At the time of writing price NBB are declining and trading around the 511 USD.

BNB has risen from $38 in January to an all-time high of $1, a growth of 638x in just one quarter.

Although the price of Dogecoin (dog) rose over the weekend to surpass $0.06 yet again, This time another token based on a cuddly dog benefited from the hype surrounding Elon Musk’s social media posts.

In a Saturday night tweet, The CEO of Tesla said he was getting a Shiba Inu dog for his household. The dog – whose breed is native to Japan – was the focus of the popular meme on which Dogecoin was based in 2013. The meme shows the dog looking at the camera with what appears to be a confused expression, while floating text represents his inner monologue.

Although Musk’s tweets likely helped the price of DOGE reach an all-time high of more than $0.08 earlier this year, The token price did not seem to flinch with the billionaire’s acquisition of a new pet. The Tesla CEO may have been joking, or could be referring to Shiba Inu (SHIB), another token project.

According to CoinGecko, The price of SHIB rose 300% in the hours following Musk’s tweet:

Musk’s social media activity may be partially responsible for increasing the price of DOGE in 2021. Although the Tesla CEO also authored a series of Dogecoin tweets yesterday, The token price has not increased as it did in early February, only rising 4.6% in the last 24 hrs. However, The price of SHIB reached a new all-time high of $0.00000008 before retreating to $0.00000005.

It is unclear if the billionaire intends to add a Shiba Inu to his family or if the tweet was another attempt to pump up the price of certain tokens. Musk has previously said he has “a big dog named Gatsby, a little dog named Marvin the Martian and a cat named Schrödinger. “

DENT is a blockchain platform for innovation in mobile telephony. The main purpose is to create a unified international telco space, rather than poorly inter-communicate national companies and give the ability to manage your calls to people. Unlike the mobile data packages of traditional telco companies, DENT offers customers more flexible options.

The project offers a blockchain-based Ethereum ecosystem that includes the mobile data marketplace, mobile app for Android that makes voice calls, a cryptocurrency exchange for trading DENT tokens, e-wallet, Global e-SIMs, and other features.

To date, the DENT user base exceeds 25 million residents in over 70 countries. Token is listed on several major exchanges. The DENT exchange offers a rich selection of about 250 trading pairs.

Perspectives of DENT
The project is created by DENT Wireless LTD. The company was established in 2017. It is based in Hong Kong, but has an international team. Tero Katajainen is the CEO and founder of DENT Wireless LTD.

The fact that the project is created by an established company with a good budget played a positive role in the perception of DENT.

To date, DENT has been able to meet its roadmap. Not all targets have been fully achieved, but in most cases there have been no problems and it is worth noting that some of the targets have been achieved ahead of schedule.

Considering the above factors, we can also be optimistic about the following development of the project and the price of the DENT token. Nevertheless, it would not be right to say that the price was constantly growing all the time. However, there is a lot to do to attract more users and increase token acceptance. Without you, the price is unlikely to grow significantly.

Past performance
Over the course of its existence, DENT has experienced a number of ups and downs. The all-time high was reached on January 9, 2018. The price per coin defrauded over $0.81.

At the end of 2017, when the coin appeared on the market, your market capitalization fluctuated greatly from day to day. In those days, the market cap was around $10k, while the price dropped from $0.0005 to $0.001 and back.

The cryptocurrency fever of December 2017, which gave BTC its all-time high, had a similar impact on the DENT price. The period from late December to early January was when DENT had its highest price ever. The coin’s market capitalization also increased dramatically.

In the second half of January, the price and market capitalization began to gradually decline. Such a pattern is nothing special, as many other altcoins show the sign of some dependence on the bitcoin price.

In the spring of 2018, the downward trend continued. The market capitalization began to fluctuate around $100,000, and then finally fell below this mark on May 11 and continued to decline.

By the end of 2018, the market capitalization has fallen to the value of late summer 2017, although this time the price was slightly above 0.001 USD per 1 DELLE in most days.

In 2019, the market capitalization has started to rise. May it reached $100k again and only fell below in July. Since then, price and capitalization mostly declined. December 2020 the market capitalization was almost $20k, while the price was slightly above $0.00023 per 1 DENT.

Such instability causes polar opinions about the future price of DELLE. The platform continues to develop very extensively and consistently. So why does the price not behave accordingly? There are many possible reasons. First of all, as it was mentioned earlier, as it happens with other altcoins, the DENT price depends on bitcoin market performance. Another reason is that the adoption of the project has not yet reached the scale sufficient to boost the circulation of the DENT token and increase its price.

Price Forecast
All these misfortunes that the DENT token has had all along should not distract us from the fact that the team behind the project is well qualified and the development is going on as planned.

2021

Currently, the company is in the run-up to its roadmap. In Q2 2020, DENT will release version 4.0 with a built-in messenger and reach the mark of 40 million users around the world. Together with the BTC price increase caused by the upcoming halving of the mining reward, this factor will increase the price of DELLE (not significantly). It is okay to expect a little growth. We will see the price of $1 – $0.5003 later this year

2023

In the long term, the price will continue to rise as the company continues to overtake the world with its blockchain solutions for mobile communications. In addition, the token will be ADDED to multiple exchanges each quarter, making it more accessible and adding liquidity. Since the company has been working stably for the past few years, it is safe to assume that it will not (suddenly) step back. It does not seem that the coin will repeat the heights of your ATH until 2023. The January 2018 price was an echo of bitcoin price manipulation, but DENT has every chance to surpass the previous “natural” price jump of 2.008 USD per 1 DENT (summer 2018) and reach at least 3.01 USD by the end of 2023. Considering the fact that another financial crisis is expected in the following years, people might even consider using a cheaper blockchain-based telco company. This means that the DENT price can grow faster and reach a better value.

2025

After the fourth halving of The Bitcoin mining reward (which is planned for 2024), many alts will follow in a positive trend. We have not yet seen DENT’s plans for the next few years, but no doubt the project team will continue to grow the business. The approximate price of the DENT coin in 2025 will reach about $7.05.

When we look at the history of cryptocurrencies. It has made great increases in a short time. Besides, when we look at the usage area of ​​dent, why not such a rise?

It is not investment advice. 🙂

When investing money, there is no path to securities, such as B. Shares over. This is not only due to the low interest rates, but also to the fact that these have made the former investment classics such as savings accounts or life insurance unprofitable. However, if you want to become a shareholder, you have to do your research and consider possible losses. Here, you will understand all the basics of buying stocks, where to buy stocks, and step-by-step instructions on how to buy stocks. Anyone who wants to buy securities does not need great expert knowledge. With some basic knowledge, you can get started buying stocks and devising a stock strategy. Still, a basic knowledge of securities trading is essential before learning about where to buy stocks. This is the only way to weigh up the risk and possible losses.

With stocks, you benefit from corporate profits

Remember that anyone who wants to buy or sell a stock has to pay an order fee. The costs often consist of a fixed basic fee per order as well as a certain percentage of the order total. However, there is no uniform regulation for fees; models such as a fixed order fee are also possible. With one share you buy a stake in a company. When a company goes public, the value of a company is divided into shares, which are then sold to shareholders as securities. As a shareholder, you are effectively a co-owner of a company – you own shares in it. If the company generates a profit, part of this is usually distributed as a dividend to the shareholders on a pro rata basis for each share certificate.

The annual general meeting of the company decides on the amount of the dividend. If you are the owner of a so-called common share, you as a shareholder have voting rights at this meeting. If you own a preference share, you have no voting rights. In return, many companies pay preferred stock holders a slightly higher dividend. A number of public companies issue both preferred and common stocks. So that there is no mix-up when ordering, each share has a unique identification number. Under this it is traded on all stock exchanges.

The value of a share is constantly re-determined in the course of a trading day through the interaction of supply and demand. Investors speculate on the future development of the stock exchange price and the company’s profit prospects. The prices of shares therefore not only reflect an objectively determined value of a company, but also the expectation of future development. In addition to company data, the psychology of market participants and general economic development also play an important role. Observe the price development closely and find out about stock analyzes and stock recommendations as well as possible risks in order to get an overview of the stock market and the individual prices.

Where can you buy stocks?

THE DEPOT

To be able to order shares, you have to open a deposit. In the past, the securities account was the place – for example in a bank – where shareholders actually stored their actual shares. Nowadays, the shares are kept electronically, so you can buy any share easily online. Your custody account is the switching point through which you can quickly and clearly view your shares with your broker. When you open a deposit for the shares, you automatically get a so-called clearing account. Your share purchases are settled through this account. All dividends or other income from securities trading are initially credited to this account. When opening a deposit, you enter a reference account – for example your current account – to which all amounts will be transferred from the clearing account.

THE BROKER

In order to be able to buy a share, investors need a so-called broker in addition to the deposit, who handles the transaction on a stock exchange. When it comes to such a transaction, i.e. buying or selling a security, experts speak of an order. The term comes from the English and means something like “order” or “order”. In the past, the classic branch bank was often used as a broker, where shareholders could place their securities orders. Today direct brokers like comdirect are a convenient alternative.

ONLINE BROKERS: SIMPLE, CHEAP, CONVENIENT

The big advantage of buying shares online is obvious: online access to your share portfolio via PC, tablet or smartphone simplifies the ordering process considerably. In addition, as a broker, comdirect provides you with many intelligent tools and information that will help you buy shares online. After opening a portfolio, buying and selling, i.e. placing buy or sell orders, is very easy and clear online. At comdirect, you use the order book for this. This is a tool which you can view and manage your orders centrally.

SELECTING THE ORDER TYPE

Next, you determine how your order will be carried out using the order type. With a cheapest order, your broker executes the order as soon as stocks are available to buy. Optionally, you can also specify a “limit” with which you set an upper price limit up to which you want to buy the shares. The order then runs as long as you have set the validity. In addition, there are other order types with which you can control the buying and selling of your shares very precisely. The so-called “stop-loss order”, with which you can automatically secure your share portfolio, is interesting for beginners. You specify a limit value below which – should the price fall – the share is automatically sold.

However, this is offset by risks that you should also consider. Amongst other things:

Company risk: By buying stocks, you are also assuming part of the risk of a company. In extreme cases, a company can go bankrupt, which can lead to the loss of the capital invested.

Price risk: The stock price can change at any time due to the interplay between supply and demand. The price of a company is determined both by the general market situation and by the business situation of the company itself. Both are a risk and can lead to price losses.

Dividend risk: The payment of dividends cannot be guaranteed.

Psychology of the market: The trading of securities on the stock exchange is also influenced by a psychological component.

Yes, because in this way your money works twice for you: On the one hand, a dividend is paid out for many shares, which is due on every share certificate. On the other hand, by buying shares, you have the opportunity to participate directly in the increase in the value of a company on the stock exchange through price gains . This form of investment can therefore enable high returns. However, stocks are also subject to risks, such as market fluctuations, which can affect returns. Losses up to a total loss are therefore possible. Funds are financial instruments that are mostly made up of stocks and bonds. The value of a fund grows with the individual values ​​it contains and passes the profits on to investors. In this way, you can draw the growth in value of your investment from real economic developments, just like stocks. The advantage: Since funds are made up of various individual values, your investment is always diversified, i.e. spread over several securities. However, like stocks, funds can fluctuate in value and result in losses.

What do we understand by megatrends?

A trend is a long-term, often fluctuating change in a characteristic in the same direction. In stock market trading trends play a major role. Here they stand for long-term price movements up or down. Accordingly, one finds upward or downward trends in the courses.

So what is the megatrend definition? A megatrend is a fundamental and sustainable trend that is associated with profound structural change and that tooks over long periods of time – often decades.

CASE IN POINT: globalization and international division of labor. The word part “mega” comes from ancient Greek and means something like “very large”. Megatrends like globalization have an impact in many areas of business, politics and society, not just on the stock market. They are global and “overarching” in the truest sense of the word. The stock exchange prices are only an expression of change and reflect the expectations of the future associated with long-term changes. There are investment strategies that specifically aim to profit from megatrends.

How do you find megatrends?

Trends in market prices are relatively easy to determine. As part of the so-called technical analysis , sophisticated mathematical-statistical procedures have been developed to measure trends and identify trend reversals at an early stage. Pure chart technicians do not even ask about the causes of the trend; trend identification is sufficient for them. But this is a very risky strategy that hides important information. That doesn’t work when identifying megatrends. They not only require intensive observation and analysis of current and past developments in a wide variety of areas, but also corresponding future projections.

GLOBAL megatrends – three examples

A wide range of results can also be obtained when searching for the keyword “megatrends” on the Internet. The megatrend definition on the internet is inconsistent. The following is an overview of global megatrends without claiming to be exhaustive and combined with a systematization. A clear demarcation is not possible. Social megatrends, for example, also have economic effects and influence politics. However, there can also be interactions between technological and economic megatrends. Everything is related to everything – that is precisely the hallmark of megatrends.

Global megatrends in four important areas

In the following, three megatrends from this megatrend universe are examined in more detail.

  • Megatrends: sustainability
  • Megatrends: Big Data
  • Megatrends: Health and Demographic Change

WHY INVEST IN MEGATRENDS – PROS AND CONS

Megatrends affect the entire economy and society – they have a global impact on all markets. But that does not mean that change is taking place in the same way everywhere. There are booming industries, markets and sectors that benefit particularly from megatrends, while others are left behind. Changes also take place at different speeds. Some areas are pioneers in change, others laggards.

Investing in global megatrends means investing your money specifically in areas that are likely to be among the likely mega-trend winners. The expectation is that such areas will grow faster than average and be successful. This should then be reflected accordingly in price developments and income distributions. Expected megatrend losers, on the other hand, are avoided. In principle, it is an active investment strategy that aims to achieve excess returns. The concept sounds logical and promising. Nevertheless, there are pros and cons. Whether a megatrend strategy really leads to success is controversial among experts.

Per

  • Companies in booming industries and future markets are growing particularly quickly. Megatrend stocks therefore offer above-average price potential.          
  • Megatrend business models promise above-average profits. This is also reflected in distributions and prices.
  • Investments in “outdated” business models that miss the “train of the day” are automatically avoided. The risk of underperformance decreases.

Contra

  • With megatrends, there is considerable forecast uncertainty. Whether a megatrend really keeps its promises can only be seen over time.
  • Expectations of above-average developments are often already priced into the courses, and over-performance is then no longer possible.
  • When you focus on specific industries and markets, the benefits of risk diversification are lost. Rather, specific industry and market risks are taken.

What should be considered in megatrends investments?

There are different ways to invest in megatrends in the stock market. It’s primarily about stocks, funds, and ETFs. One option is to specifically buy megatrend stocks – these are stocks in companies that are active in booming industries and future markets or that pursue business models that rely on megatrends.

If you limit yourself to the stocks of certain companies when investing in megatrends, you also buy the respective specific company risk. A megatrend can be very promising, but that does not automatically mean that a business model linked to it works. A diversified portfolio should also be ensured with megatrends stocks. A wide diversification is possible, for example, through megatrends ETFs. In such an ETF, megatrends are mapped via the index construction. Either an existing index is “adjusted” for values ​​that do not match the respective megatrend. Or new indices are constructed that are tailored to the respective megatrend. Anyone looking for an ETF related to megatrends will easily find it. There is now a wide range.

The advantage here: ETFs enable megatrends portfolios that easily map different booming industries and future markets.

ETF: Megatrends indices – here are some examples of areas with ETF offers:

  • Digitization and information technology
  • Cyber ​​security
  • Renewable energy
  • Sustainability
  • Clean water and supplies
  • Global infrastructure
  • Health & Wellness

IMPORTANT TO KNOW: Every ETF provider determines which index construct he bases his fund on. Indices can also differ significantly within a megatrend. Two ETFs on the health & wellness megatrends can refer to very different health indices and then perform differently. You should therefore always check what is actually behind a megatrend index. In contrast to conventional ETFs, an ETF on megatrends pursues an active goal – through targeted selection within the framework of the megatrend it should perform better than the market average. This requires a correspondingly more complex management, which is also reflected in the costs of the ETF. They are higher than with “normal” ETFs . The calculation with the megatrends can work, but it doesn’t have to. In any case, staying power is advisable for megatrend investments. Megatrends have a long-term effect, and this may also apply to investment success.

What is the tracking difference – and what is the tracking error?

The key figure indicates the extent to which the performance of an ETF deviates from the respective reference index in a period under consideration. This is particularly important for ETFs, because they have declared that they want to replicate an index as precisely as possible. The tracking difference shows whether and to what extent the ETF is achieving this goal, even overachieving it or staying below its target. The term tracking error is often used alongside the tracking difference. Sometimes it is used synonymously for tracking difference, sometimes it refers to the measured standard deviation. The tracking difference then indicates the (average) deviation in the performance of the fund and the index, while the tracking error describes their fluctuation over time. That is a subtle difference.

HOW IS THE TRACKING DIFFERENCE CALCULATED?

The simple formula is: Tracking Difference = benchmark index performance – ETF performance

EXAMPLE : On an annual basis, the return is the yardstick for calculating the performance of funds. If an ETF achieves an annual return of 7.5% and the relevant reference index achieves a performance of 8%, the tracking difference is 0.5%. If the ETF develops exactly like the reference index, the tracking difference is 0.

GOOD TO KNOW: Sometimes the order is reversed when calculating: Tracking Difference = ETF performance – Reference index performance. This is then associated with a change in sign. It is advisable to always check the underlying definition when specifying key figures in order to avoid misinterpretations.

How can the tracking difference be explained?

Why can there be deviations in performance at all when the ETF portfolio is a reflection of the respective reference index? Shouldn’t one always expect a tracking difference of 0?

The answer is: yes – in a world without transaction costs, without fees, with immediate reinvestment of all returns at any time and immediate follow-up of index adjustments. The reality is a little different. ETF fees are a major cause of tracking difference. Even if ETFs are very cheap – the annual management fee has a negative impact on ETF performance compared to index performance.

In addition, other influencing factors can influence the replication accuracy:

Transaction costs: Necessary portfolio shifts due to changes in the index cause additional transaction costs.

Dividends: Can cause deviations due to delays in reinvestment, sometimes also due to different tax considerations in the index than in the fund assets.

Liquidity: With the provision of liquidity, the liquid assets generate no or only very little income, but there are also no losses.

Securities lending: Additional income can be achieved by lending securities from the fund’s assets. Securities lending improves ETF returns compared to index performance.

What is the significance of the tracking difference?

The tracking difference is not static, even if the ETF fees as the main influencing factor are usually a strong constant. But other factors that are also relevant change over time. Transaction costs depend on the frequency and extent of reallocations, dividends vary, the conditions for securities lending are exposed to market influences, etc. The variability of the tracking difference is measured – as mentioned above – via the tracking error.

In principle, the tracking difference is always a so-called ex-post consideration. That means: the deviation can only be determined afterwards. An estimate for the future can be derived from this, but it is fraught with uncertainty. It is greater the more variable factors influence the tracking difference.

Positive / negative tracking difference – what does that mean?

If we start from the definition: Tracking Difference = performance of reference index – performance of ETF, then a value with a positive sign always means that the performance of the ETF has remained below the index performance by the relevant percentage. The higher the amount, the greater the deviation. A negative sign indicates that the ETF has outperformed its benchmark index. This does happen and is possible if the yields outside of the pure index replication more than offset the costs incurred. Another reason may be deviations in the index replication, which lead to the index fund “outperforming” its reference index. These statements also apply if the tracking difference is defined “the other way round”, then again with the opposite sign.

ETF construction and tracking difference

The type of ETF construction can also have an impact on the tracking difference. As a rule, the index replication of synthetically replicated ETFs is particularly precise. The tracking difference is then largely cost-related and relatively stable.

In the case of physically replicated ETFs, on the other hand, there may be more deviations. These tend to be higher for distributing funds than for accumulating funds. The reason: in the case of distributing funds, larger amounts must be held as liquidity for distribution purposes.

The tracking difference is built in almost automatically when sampling index funds. Sampling is a variation on physical replication. An index is not reproduced 1: 1, but – mostly for cost reasons – you limit yourself to a representative selection. Of course, this increases the likelihood of deviations – up or down.

The market for ETFs or exchange-traded index funds is growing. These passively managed investment instruments are particularly interesting for private investors who are looking for a simple, transparent and convenient investment opportunity. In this article, we explain what ETFs are and how they work. In addition to a general definition of ETFs, we deal with the different types of index funds and the advantages and disadvantages of ETFs. We also deal with the level and composition of the costs of ETFs, as well as the role of the ETF issuer. As well as other important questions: How safe are ETFs actually and for which types of investors are they suitable?

What are ETFs and how do they work?

ETFs are exchange-traded index funds (Engl. E Xchange T raded Fands). What an ETF is and how this popular form of investment works can be easily deduced. These funds are exchanged on the stock market, as the name implies. As a trader, you can buy and sell ETFs any trading day.

GOOD TO KNOW: While actively managed funds aim to outperform the reference index and thus the market, ETFs pursue a different investment strategy: They want to track the performance of the underlying index as precisely as possible .

What types of ETFs are there?

There are basically three ways of categorizing ETFs: by asset class, by replication method and by use of income.

  • ETFs on different asset classes
  • Physical vs. Synthetic Replicating ETFs
  • Distribution or retention?

What does an ETF cost? How does the cost put together?

Since ETFs are passive investment products that do not require fund management, the running costs are lower compared to actively managed investment funds. If you would like to get an overview of how much it costs you to own an ETF per year, you can find out about the so-called running costs (Total Expense Ratio, TER) on the website of the fund provider, in the sales prospectus or in the factsheet. This statistic is expressed as a percentage which represents the annual expense of operating an ETF. The TER consists of the fees for the administration, the safekeeping of the securities, license fees for the replication of the index as well as distribution fees, which are incurred for the distribution or the marketing of the fund, for example for the preparation of prospectuses. In addition, you as an investor incur additional costs for an ETF that are not included in the TER. For example, physically replicating funds incur additional rebalancing costs and synthetically replicating ETFs have swap fees. Of course, there are also fees for trading ETFs in the form of broker fees and spreads (difference between purchase and sale price).

GOOD TO KNOW: ETFs with a low total expense ratio (TER) do not necessarily generate a higher return than ETFs with higher ongoing costs.

What are the pros and cons of ETFs?

ETFs are considered to be inexpensive, transparent, broadly diversified, but also flexible, liquid and individual forms of investment.

ETFs are cheaper than other types of funds because the administrative effort is relatively low and therefore there are hardly any costs for ETF management. There is also no issue fee, which is partially charged for “entry” into an actively managed fund. ETFs guarantee transparency by always referring to a specific index – its composition is usually known and you can track its performance on a daily basis without having to look at your portfolio. However, ETFs are not all about advantages. Since index funds develop in parallel with the underlying indices, they are also subject to the same fluctuations – investors have to withstand this volatility in ETFs.

Advantages of ETFs

  • Comparatively low fees
  • Transparent and tradable every trading day       
  • Wide risk diversification possible            
  • Individual investment strategy can be implemented       
  • Largely protected as a special fund        

Disadvantages of ETFs

  • Fluctuations in value are unavoidable
  • Risk of loss present
  • No guaranteed profits
  • No individual investment decisions
  • Little opportunity to influence

How safe are ETFs?

The question of how secure ETFs are does not have a general response. They are covered as special properties in the case of the insolvency of the fund company or the custodian bank. But be careful: Exchange-traded index funds are also subject to normal market fluctuations and offer no protection against possible losses. With passive fund products, however, the broadly diversified indices may result in a lower risk than with investments in individual stocks.

What does an ETF issuer do?

An ETF issuer is the publisher of ETFs. He compiles ETFs on various indices and makes them available for exchange trading. Of course, the issuer also decides on the replication method and the use of income from the ETF. So whether the underlying index is replicated physically or synthetically and whether the dividends are distributed or reinvested. Even if ETFs are not actively managed, the issuer ensures that the composition of an ETF always corresponds to the reference index.

There are a few key metrics that investors should keep in mind when adding new securities to their portfolio. We will show you the most important share key figures from the fundamentals analysis, why they are important for buying shares and what is behind them.

Why beginners benefit from key figures when valuing stocks

Beginners in stock trading make the decision which blocks of stocks to buyor often do not sell easily. Risks cannot be completely ruled out when investing in stocks, but investors can reduce these risks to a calculable level. The most important tool for valuing stocks is fundamental analysis (also called fundamental analysis). By definition, fundamental analysis is a form of stock analysis that relies on key company metrics such as earnings, sales and cash flow. The aim is to calculate the “fair value” (value) of a company and its shares. In order to determine this, investment professionals check numerous share ratios as part of the analysis. Analyzing stocks based on key figures can increase the chance of finding stocks with a positive price development.

GOOD TO KNOW: The foundation analysis is a comparatively complex process for stock market professionals. To evaluate the profitability of a company, not only the individual key figures but also the economic environment are considered as part of a global analysis. In addition to the individual values, experts also analyze the respective industry.

WHICH METRICS ARE IMPORTANT FOR STOCKS

The following key figures give you an overview of the relationship between company and share price development of a stock corporation.

1. The price-earnings ratio (P / E)

The price-earnings ratio of a share is one of the most well-known figures in the stock valuation.

For this purpose, the current price of the share is divided by the company profit of the previous year. In a much simplified way, when determining the company profit, also known as the annual surplus, the sales revenues are compared with the expenses. If the expenses outweigh the revenues, one speaks of an annual deficit. The company made a loss in the period under review. Determining a P / E ratio would not be helpful in this case.

Good to know: You can find current prices and important figures in our comdirect share informer.

2. The equity ratio (EKQ)

The equity ratio is an important part of risk analysis when valuing stocks. The rate is, among other things, an indicator of how solidly a company is financed. The EKQ is also simply calculated:

The total capital is formed from equity and debt. Debt capital is capital that is made available to companies by third parties, e.g. banks in the form of loans with different terms. Equity describes the financial resources that the owner (s) brought into the company. This also includes undistributed profits that are retained by the company for investment.

What does the EKQ say?

A high equity ratio is assessed as positive, as the company finances itself predominantly from its own resources and does not, or only to a small extent, rely on outside capital.

The higher a company’s equity ratio, the lower the probability of insolvency and the higher the creditworthiness. The higher credit rating in turn makes it easier for companies to raise outside capital on the capital market.

IMPORTANT: It is difficult to compare the equity ratios of companies from different industries. For example, the equity requirements of financial companies are, on average, significantly lower than those of industrial companies. So when you analyze the EKQ, it should always be done in an industry comparison.

GOOD TO KNOW: You can find out how high a company’s equity is in the respective quarterly reports or balance sheets that companies regularly publish.

3. The price-to-book value ratio (KBV)

To find out how a company’s equity is related to its market capitalization, you can calculate the price-to-book ratio: KBV = share price / book value of the share

The book value corresponds to the equity, which is divided by the number of shares issued. It thus indicates the ratio of equity to the number of shares.

4. The price-to-sales ratio (KUV)

The P / E ratio provides information about how highly a company is valued on the stock exchange. But not every company shows a profit. While the profit of a company can be embellished or diminished, the turnover can hardly be manipulated.

To calculate the price-sales ratio (KUV), the price per share is divided by the sales per share.

5. Price to Cash Flow Ratio (KCV)?

The KCV ratio indicates how high each liquid euro is valued on the stock exchange. It is calculated according to the formula: price per share divided by cash flow per share.

What does the KCV say?

The price to cash flow ratio (KCV) can hardly be manipulated. The KCV can therefore be used in addition to the KGV. The term cash flow describes the inflow of money during a period. It marks the balance of deposits and withdrawals during a financial year. The cash flow is systematically higher than the profit, since taxes, interest and depreciation are not taken into account. The cash flow shows the liquidity of a company. As with the P / E method, the lower the P / E, the cheaper a share is. Value investors rely on values ​​with a KCV of less than ten.

6. The dividend yield

The dividend yield gives investors the opportunity to find out the relationship between the share price and the dividend paid or announced. The dividend yield is published by many public companies for investors.

GOOD TO KNOW: The dividend yield can be calculated either with the last dividend paid out or with the announced dividend. Both methods have their advantages and disadvantages. Since the forecast dividend can change by the end of the year, the dividend yield should also be seen more as a forecast and not as a benchmark. If the calculation is carried out with the “old” dividend, the figures are fixed, but possible conclusions about the upcoming dividend payment are also speculative. When publishing the dividend yield, companies usually use the current share price and the last dividend paid.

What does the dividend yield say?

If you bought the stock at a cheaper price than the current one, your dividend yield may also increase. If the share price is higher, your dividend yield is likely to decrease. It is important that you analyze the development of the dividend yield over a period of several years. That is the only way to guarantee that the number will continue to rise steadily. You should also take into account that you are not entitled to a return when you buy shares. The shareholders’ meeting will determine whether a return will be paid.

The savings account is an investment without a fixed term, with which the balance usually pays variable interest. The savings account is probably the best-known savings account.

The savings account is used to invest and accumulate money and cannot be used for daily payment transactions. The saver receives a savings certificate from the bank. Traditionally, this is a savings book in which the bank records deposits and withdrawals. In order to withdraw money, it is usually necessary to present the savings account. Furthermore, the contractual agreements also regularly contain a clause authorizing the bank to pay out credit to anyone who presents the savings book. As an alternative to the savings book, a savings card can also function as a savings certificate. In practice, the savings card is increasingly replacing the savings book.

What are the risks?  

Interest rate risk: The interest rate can rise or fall during the investment period. These offer the customer the prospect of compensation going beyond the legal entitlement – but without a legal entitlement.

How are the performance, profit and benefits of the savings account structured?       

You receive an interest rate that is based, among other things, on the respective market interest rate. The interest rate varies from institute to institute and can be adjusted by the banks at any time.

What obligations do I have towards the bank?     

You are obliged to carefully keep the savings certificate. Entries in the savings book or account statement must be checked for correctness immediately upon receipt and objections raised immediately.

When can I have access to the money in the savings account?    

As a rule, you can dispose of the accrued interest within two months of being credited, regardless of the amount of interest income and the notice period. Thereafter, the interest is subject to the agreed termination rules.

In addition, there is no entitlement to early repayment of the savings deposit. If you want to withdraw more money, you have to cancel this partial amount. When terminating, the notice period set by the bank (at least three months) must be observed. With many banks you can have higher amounts of credit at your disposal without observing the notice period. However, the bank then demands so-called advance interest. The advance interest relates to that part of the withdrawal amount that exceeds the maximum amount per month.

What details does the bank have, among other items, to supply me with?       

Every German credit institution is legally obliged to inform its customers about the individual services of its products and the associated prices.

From the bank’s list of prices and services, you can see which costs are incurred for the savings account, but also which interest is granted. The current interest rate is posted, for example, in the branches. Before concluding the contract, the bank must give you a detailed list of prices and services. Every credit institution is also legally obliged to inform its customers about the statutory deposit insurance when concluding a contract and from now on once a year.

Where can I open a savings account?         

A savings account can be in a bank open. Knowledge and advice can be accessed from the appropriate provider in the branches, electronically or by phone. Think on how long and for what reason you intend to spend money in advance and closely review the circumstances.

Who is the savings account suitable for?   

The savings account is suitable for those investors who prefer a conservative, safe investment to build up reserves and do not need the flexibility of a call money account.

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