Bonds and Stocks vs. Cryptocurrency

Reference to @SmartLiquidity for the Image

Introduction

Having adequate knowledge and information before making financial decisions such as investing in stocks, bonds, or cryptocurrency. Understanding the advantages and weaknesses can help one know where to invest their finances best. For instance, company stocks of firms such as Nestle and Volkswagen are very attractive and promise a great amount of profit for individuals looking for opportunities to invest. Despite this, some people who own stocks in such firms are looking for other opportunities to invest in cryptocurrency after trading their stocks and bonds holdings.

Buying crypto, especially bitcoin, is now like a trend, and many individuals are entering the crypto space without assessing the trade’s pros and cons or weaknesses. This paper looks at the financial advantages of Russian bonds, Nestle, and Volkswagen stocks while also looking at the shortcomings in cryptocurrency in an attempt to help reach a financial decision on investment.

Financial Advantages of Nestle Stock, Bonds, And Volkswagen Stock

Financial Advantages of Nestle Stock

Nestle, one of the largest food groups globally, raised a whole-year sales target after reaping the benefits of price increases on its products, which range from bottled water to pet food. According to Nestle S.A. ADR Stock Price & News (2022), the company whose shares saw an increase of more than three percent has eclipsed other companies by leveraging the strength of brands like Perrier Water. According to (Affonso, Dias & Pinto, 2021), the firm further increased prices in the last quarter of 2021. The same is expected this year when input costs are anticipated to rise even more than the four percent witnessed last year.

Nestle, like its peers, is facing challenges with the supply chain as the global economy is still trying to fight against COVID-19. The hikes in prices should help ensure the margin’s steadiness at around seventeen percent, followed by an average margin boost in the midterm (Affonso et al., 2021). The company raised its annual organic growth guidance to between six and seven percent from five to six percent after the sales improved to about seven percent in the third quarter of 2021. The volume growth is anticipated to slow as the boost witnessed currently because of the pandemic wanes (Affonso et al., 2021). According to Nestle S.A. ADR Stock Price & News (2022), the benefits of greater volumes and pricing would fully show this year.

Financial Advantages of Volkswagen Stocks

There is evidence that this stock should be a great choice for investors, for instance, a surge in recent price momentum shows an increasing interest of investors in the stock. According to Volkswagen AG Stock Price & News (2022), it is well-positioned with a one-month price change of about four percent. Whereas all stocks have the potential of witnessing a hike in price for a small period, a real momentum player is needed to deliver positive returns for an extended period. Volkswagen stock is in that category as the stock witnessed a gain of seven percent over the last year (Affonso et al., 2021). Additionally, the momentum for this stock is fast-paced, as it has a beta of around two (Affonso et al., 2021). This shows that it moves sixty percent higher than the market in any direction.

Given the price performance, it is clear why the Volkswagen stock scores a B in momentum. This suggests that the best time to choose to purchase stocks from Volkswagen would be now if one desires to benefit from the momentum. Additionally, a rising trend in earnings estimate revisions has helped the stock earn a high ranking, ranked second by Zacks. Research reveals that the momentum influence is strong among the top stocks.

The reason for this is that more investors have developed an interest in stocks that cover analysts and have raised the earnings estimates, which helps in keeping the prices up. The Volkswagen stock is trading at a great valuation despite processing fast-paced momentum traits. Regarding the Price-to-Sales ratio, the stock currently appears cheap (Affonso et al., 2021). For every dollar of sales, an investor only needs fifty-eight cents.

Financial Advantages of Bonds

Investing in stocks, especially those belonging to companies such as Nestle, is great. It becomes even better when someone invests in bonds such as Russian bonds. The financial weaknesses that can be found in stocks are eliminated by choosing bonds (Isaac, 2020). For instance, the volatility in bonds is lower than in stocks which shows that even though it is safe to invest in stocks, it is safer to do so in bonds.

Additionally, stocks suffer from more day-to-day volatility than bonds (Reboredo, Ugolini & Aiube, 2020). The interest payments are higher in bonds than the general level of dividend payments. Bonds are also liquid, which means that it is easier for an organization to sell a significant amount of bonds without impacting the price. They are also attractive due to the comparative certainty of a fixed interest payment twice annually plus a fixed lump sum at maturity.

Financial Weaknesses of Cryptocurrency

Despite all the popularity of the idea that crypto is a great asset, buying one is similar to buying a share of stock in companies such as Nestle or Starbucks. With the two companies, one gets quarterly earnings releases, investment bank presentations, earnings calls, and media appearances. With trading in stocks, one has a general idea of how a company is doing financially and possibly in the future. Even with micro-cap firms that are traded publicly, one can access financial statements.
However, trading in crypto is entirely different, where there are extreme periods of volatility and zero fiscal statements. It just exists as well as thrives on speculation and hype, plus can crumble on fears that could appear out of nowhere. This means that one could lose everything while investing in the crypto business if they do not comprehend for what they are signing up. This continues to be seen as more prominent investors continue to be involved in the business and use different tactics.

Trading in crypto is different from how someone can trade in a traditional market. For instance, it is still a challenge to access leverage. A trader particularly has to pay a funding raise to maintain their options and thus positions open, which is expensive. Therefore, one must note that unlike conventional markets, where there is a huge amount of leverage plus borrowing that they can get at low costs, crypto-leveraged cash is expensive.

Conclusion

The paper has shown the differences between investing in bonds, stocks, and cryptocurrency by revealing the financial advantages of stocks and bonds while also showing the weaknesses of cryptocurrency. For instance, individuals who own stocks at Nestle will earn more profits this year than even last since it is expected that the company will raise the prices to more than four percent in 2021.
Volkswagen stock is gaining interest from many investors as its earnings estimates are high. This means that the price, like that of Nestle, will also rise. The Crypto business, as popular as it is, continues to welcome sophisticated investors who are applying various tactics that can make others lose as they gain. Additionally, also paying a funding raise to maintain one’s options in crypto is more expensive than investing in bonds.

References

Affonso, F., Dias, T. M. R., & Pinto, A. L. (2021). Financial Times series forecasting of clustered stocks.Mobile Networks and Applications, 26(1), 256-265. Web.
Isaac, A. (2020). Foreign investors flock to Russian government bonds. Wall Street Journal. Web.
NSRGY | Nestle S.A. ADR Stock Price & News. (n.d.). WSJ. Web.
Reboredo, J. C., Ugolini, A., & Aiube, F. A. L. (2020). Network connectedness of green bonds and asset classes.Energy Economics, 86, 104629. Web.