How to Short Crypto: Four Ways to Capitalize off Market Downturns

The crypto markets have been in a freefall since hitting highs in late 2021. And many folks think things are poised to continue to fall amidst the current crypto winter. Some crypto tycoons like Richard Heart (the guy behind Hex and PulseChain) think this correction could drag Bitcoin all the way back down to $11,000 a token. If that turns out to be true, knowing how to short crypto could be a very lucrative proposition. And we’re here to help.

Just a couple years ago, the idea of Bitcoin hitting $11,000 would be cause for celebration among crypto devotees. But for those that got in at the height of the recent crypto boom, it could feel catastrophic. Which is why we’re going to show you four ways to try and make up some of those losses should Bitcoin continue its downward trajectory.

Chart showing why it makes sense to learn how to short crypto.

How to Short Crypto No. 1: Margin Trading

Crypto purists may not be too enthusiastic about centralized exchanges. But crypto’s growing popularity made it a necessary evil to draw in more folks. Anyone that’s stumbled through the annoying process of buying crypto on decentralized exchanges should get it. Plus, they made it easier than ever to trade fiat currency for digital coins.

But in addition to simplicity, most centralized exchanges allow for margin trading. Now typically, margin trading is done to maximize returns on upward movement. However, some exchanges like Kraken and Binance allow folks to borrow tokens outright. From here, folks can then sell those tokens right back on the market.

Eventually, the brokerage is going to want their tokens back though. If the tokens continue to go down in value, that’s not a big deal. You just buy them at the (hopefully) lower price. Then once you return them, you can simply pocket the difference. When it comes to learning how to short crypto, this is probably the easiest. And it doesn’t require signing up for new accounts with another service. You can learn more about margin trading here.

Short Strategy No. 2: Futures Markets

When Bitcoin and its crypto brethren went big in 2017, it grew so popular that a futures market was built around some of the larger tokens. These days, the Chicago Mercantile Exchange (CME) allows folks to short crypto. Here’s how it works…

To short crypto, you essentially sell a futures contract. This is a bet that the price will go down in the future. Here, someone buys the contract from you for the going price of a token. Then when they demand their cryptocurrency contract filled by the seller, he or she would simply buy the tokens at the lower price and fulfill their end of the obligation, pocketing the difference.

These days, it’s not just the CME that offers derivatives trading. Popular exchanges like Kraken, eToro and even TD Ameritrade offer ways to trade futures contracts now. In fact, this might be an even easier way to learn how to short crypto for folks that are unfamiliar with some of the popular crypto exchanges. And if you’d like to learn more about futures trading, just follow this link.

The Big (Crypto) Short No. 3: Inverse ETFs

Those familiar with the stock market should know there’s an ETF for seemingly everything. Betting inflation will continue to rise? There are a whole bunch of them to invest in. Think space travel stocks are about to see a boon in popularity? Look no further than the Procure Space ETF (Nasdaq: UFO). So naturally, there are several of them based on profiting from Bitcoin’s breakdown.

One of the first inverse crypto ETFs to hit the market was BetaPro Inverse Bitcoin ETF, which is traded on the Canadian stock exchange. Since then, the ProShares Short Bitcoin Strategy ETF (NYSE: BITI) has been launched here in the U.S. And there are likely more to follow soon.

And now that you’ve learned how to short crypto the three easiest ways, we’ll close out with one with a bit more of a learning curve…

Short Play No. 4: Prediction Markets

You’re probably aware that you can go to the FanDuel website or pop open the Caesars Sportsbook app on your phone to bet on sports. If you want to try and predict who’s gonna win the Superbowl, the World Series or the World Cup, it’s that simple. Guess right and you can be handsomely rewarded. Well, there’s a similar process for betting on which direction crypto will go.

These prediction markets might fall more in favor with those looking for a pure crypto play too. There are several decentralized prediction markets out there to choose from. Gnosis, for instance, is a platform for prediction market applications on the Ethereum blockchain. PlotX is a cross-chain prediction market protocol. This one makes it so users can make crypto price predictions in hourly, daily or weekly timeframes.

Then there’s Polymarket. This is an outlet for betting on a wide variety of hot topics. Want to make a wager that you know how long Vladimir Putin will stay in power? How about whether Jack Dorsey returning as CEO of Twitter (NYSE: TWTR)? The list of things you can bet on at the Polymarket website is a long one. And naturally, there are all sorts of crypto-related ones.

Here you can bet whether Celsius Network will announce its bankruptcy by July 13? Do you think Ethereum (ETH) will be above $1,200 on July 1? So far, the yes votes are winning. So a bet that it won’t could lead to a tidy payout.

So if you came here wondering how to short crypto, now you’ve got four easy ways to go about it. That being said, we do have some advice…

The Bottom Line on How to Short Crypto

Predicting which way the markets are going to go at any given time is nearly impossible. And that’s doubly true when it comes to cryptocurrencies. At least in the stock market investors have access to a wide array of fundamental information to make a more educated bet. But we don’t quite have the same thing when it comes to crypto.

Sure, we can read the whitepapers, look at trading volume and seemingly follow the influx or efflux of cash toward a given token. But shorting the crypto markets comes with a fair share of risk. The crypto markets are extremely volatile. Sudden increases in price can happen at a moment’s notice.

So just because you know how to short crypto, doesn’t necessarily mean you should. And even if you think you’ve got a hot tip that’s telling you which way crypto prices are going, remember, don’t bet more than you can comfortably lose. Short positions can cost investors a lot of money. They’ve even been responsible closing down some hedge funds. So be careful out there and good luck.

The post How to Short Crypto: Four Ways to Capitalize off Market Downturns appeared first on Investment U.

6 Infrastructure ETFs to Watch in 2022

Infrastructure ETFs offer investors a diversified approach to this lucrative sector. Moreover, the infrastructure industry sits at the brink of global disruption. Investors can get in on companies making the changes that are shifting capital availability, changing environmental priorities and rapid urbanization. Moreover, this presents a unique opportunity for investors to get in early on disruptions in this sector.

List of 6 Infrastructure ETFs

  • Global X U.S. Infrastructure Development ETF (BATS: PAVE)
  • iShares Global Infrastructure ETF (Nasdaq: IGF)
  • FlexShares STOXX Global Broad Infrastructure Index Fund (NYSE: NFRA)
  • iShares U.S. Infrastructure ETF (BATS: IFRA)
  • SPDR S&P Global Infrastructure ETF (NYSE: SSGA)
  • Alerian Energy Infrastructure ETF (NYSE: ENFR)

Below, I’ll go over the highlights for these infrastructure funds below. This includes a description of each fund, the fund’s top holdings and investor returns.

Infrastructure ETFs

Infrastructure ETFs to Buy in 2022

Global X U.S. Infrastructure Development ETF

Expense Ratio: 0.47%

Holdings: 98

The Global X US Infrastructure Development ETF offers exposure to domestic infrastructure development. The list includes companies with a focus on construction and engineering, raw materials, composites and transportation companies. It also includes companies with a heavy focus on construction equipment production and distribution. It seeks to track the S&P Global Infrastructure Index.

PAVE manages assets worth around $4 billion, making it the largest dedicated infrastructure ETF on Wall Street. Among its holdings are stocks that are publicly traded in the construction materials, heavy equipment, engineering and construction sectors.

The portfolio has a broad scope despite a targeted approach. Global X U.S. Infrastructure Development ETF has about 98 total positions. Some of the company’s top holdings include Nucor, Sempra Energy, Deere & Co., Fastenal and CSX. Moreover, this fund is highly diversified with no assets representing more than around 4% per holding.

Similar to the performance of the rest of Wall Street, the fund has lost about 20% this year so far.

iShares Global Infrastructure ETF

Expense Ratio: 0.43%

Holdings: 75 

The iShares Global Infrastructure ETF offers exposure to companies that provide transportation, communication, water and electricity services. It also seeks to track the S&P Global Infrastructure Index.

The index tracks the performance of the stocks of large infrastructure companies around the world. It contains companies in developed markets around the world. So, you should keep in mind that this fund is not exclusive to U.S.-based stocks. However, nearly 40% of this ETF contains U.S.-based companies. Moreover, some of the international companies in this ETF do business in the states. If you’re looking to invest in a domestic infrastructure ETF, check out the iShares U.S. Infrastructure ETF in the list below.

This fund currently has more than $3 billion in total assets. Its top holdings include Atlantia, Transurban, Enbridge, Aena and NextEra Energy. This fund is highly diversified, similar to the infrastructure ETF above. Its top holding carries 5% of the fund.

This infrastructure ETF is faring well despite ongoing market volatility. The fund is down around 3% so far in 2022.

FlexShares STOXX Global Broad Infrastructure Index Fund

Expense Ratio: 0.48%

Holdings: 220

FlexShares STOXX Global Broad Infrastructure Index Fund seeks to track STOXX Global Broad Infrastructure Index. The index reflects the performance of public infrastructure companies in the developed and emerging markets. It targets loosely-defined infrastructure sectors including energy, communications, utilities, transportation and government outsourcing.

This fund has around $2 billion in total assets. However, this fund is the largest infrastructure ETF in terms of holdings. The fund currently has around 220 holdings. Its top holdings consist of the Canadian National Railway, Canadian Pacific Railway, Verizon, Comcast and Enbridge. Similar to the ETFs above, this fund is highly diversified. Its top holding accounts for 5% of the entire fund.

This fund is in the red so far in 2022 with it being down 12%. However, it’s performing relatively well compared to the rest of the market. The fund’s stability is largely due to this fund’s diversification.

iShares U.S. Infrastructure ETF

Expense Ratio: 0.30%

Holdings: 163

The iShares U.S. Infrastructure ETF tracks the NYSE FactSet U.S. Infrastructure Index. It offers exposure to two groups of infrastructure companies: owners and operators, such as railroads and utilities, and enablers, such as materials and construction companies. So, investing in this fund can provide investors with access to infrastructure companies that may benefit from increased infrastructure activity in the United States.

This infrastructure ETF is smaller than the rest with assets reported around $1 billion. Despite this, this fund is one of the most diversified on this list. It has over 160 holdings in total. Furthermore, each stock in this fund accounts for less than about 1% of the portfolio. So, the wide diversification helps combat market volatility.

This infrastructure ETF is down nearly 13% in 2022. However, this fund is promising long-term with returns of nearly 30% in the last five years. So, this fund should pick up when the market cools down a bit.

SPDR S&P Global Infrastructure ETF

Expense Ratio: 0.40%

Holdings: 75

The SPDR S&P Global Infrastructure ETF seeks to track the performance of the S&P Global Infrastructure Index. The index comprises 75 of the largest publicly listed infrastructure companies.

The index has exposure to companies across transportation, utility and energy infrastructure sub-industries. Approximately 42% of its portfolio consists of industrials and 39% focuses on utilities. The remaining 20% consists of energy stocks.

This infrastructure fund’s top holdings include Atlantia, Transurban, Enbridge, Aena and NextEra Energy. Moreover, this fund is similar to the others with its diversification. The top holding in this fund carries around 5% weight in the fund.

This fund is holding up well with ongoing market volatility with -3% returns in 2022. So, this is one of the promising infrastructure ETFs as the market goes back to normal.

Alerian Energy Infrastructure ETF

Expense Ratio: 0.35%

Holdings: 33

The Alerian Energy Infrastructure ETF targets the Alerian Midstream Energy Select Index. This index includes companies operating in the midstream energy infrastructure sector in North America. It includes corporations and master limited partnerships (MLPs) dealing with pipeline transportation, rail and energy storage and processing.

Approximately 90% of the fund’s holdings are in companies involved in the gathering, processing and transportation of natural gas and petroleum. Its top holdings include Enbridge, Enterprise Products Partners, TC Energy, Energy Transfer and Cheniere Energy. This fund is less diversified than the others on this list with its top three holdings representing over 25% of the fund.

This ETF is in the green so far in 2022 with returns over 6% year-to-date. Moreover, with the rest of the market generally in the red, this presents a huge opportunity for investors looking to get in on diversified infrastructure stocks.

The Final Line on Infrastructure ETFs

Infrastructure ETFs offer investors a diversified, lower-risk approach to investing in this sector. Moreover, investing in disruptors of the industry can produce big returns for investors.

However, make sure to do your research before investing. Returns on investments are never guaranteed and there are always risks with investing. However, this is where doing a deep dive on a fund can make all the difference.

For other infrastructure investment opportunities, check out these infrastructure stocks. There are lots investment opportunities to consider today…

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Investing in Metaverse ETFs: Exploring the Future of Digital ROI

One of the biggest buzzwords sprawling the digital landscape in 2022 is “metaverse.” Coined by Meta Platforms (Nasdaq: FB), it’s a concept that marks the next iteration of the digital revolution. The potential to live, work and play online. As you might imagine, the metaverse is a lucrative investment opportunity just waiting to happen. It’s why many investors have begun to ask if there are any metaverse ETFs out there.

Not only are there metaverse ETFs out there, these funds are well-poised to capitalize on long-term digital trends. Here’s a closer look at the landscape of metaverse ETFs. As well as why these funds are smart investments for tech investors looking to ride the metaverse wave to higher heights.

The best metaverse ETFs for 2022.

Metaverse ETFs: What is the Metaverse?

In simplest terms, the metaverse is virtual reality. In a literal sense, it’s a collection of digital networks designed to make living, working and playing possible in a fully virtual capacity. Imagine logging online and using a virtual reality headset to look around a full rendered 3D environment where anything is possible.

It sounds like something out of the hit novel (and film) Ready Player One. However, the metaverse is quickly becoming a reality. Leading the charge into this new, digital frontier is Meta Platforms (formerly Facebook). Meta has already pioneered simple metaverse applications. For instance, virtual meeting rooms with avatars and VR games that immerse the user in an explorable virtual world. While exciting, these applications are only the beginning of what the metaverse will eventually become.

Meta isn’t the only company buying into the metaverse as an evolution of the internet. Numerous companies are preparing for a wave of virtual reality tech. It’s why investors are turning to metaverse ETFs as they seek to understand the direction of this technology. As well as the companies contributing to it.

Different Metaverses are Coming to Fruition

When talking about the metaverse, it’s important to understand that there’s a difference between the concept of the metaverse and the different applications of that concept. Specifically, we’re likely to see many different versions of the metaverse that vary across industries and for different purposes. Some of the emerging case studies include:

  • An Industrial Metaverse, built on the Industrial Internet of Things (IIoT).
  • A Corporate Metaverse, designed with remote, decentralized work in mind.
  • An Entertainment Metaverse, where people come together to consume media.
  • The Asset Metaverse, which is already rising to prominence thanks to NFTs.

As the metaverse concept continues to take shape, so will viable applications. Whether for work or entertainment, or as a way to unlock the full potential of the digital era, the metaverse and metaverse ETFs are gaining momentum. And, with so many applications, there are even more opportunities to invest in the companies building the metaverse.

Who’s Building the Metaverse?

There are a handful of companies building the metaverse today. However, their ranks grow larger every day. Meta Platforms is pioneering everything from VR goggles to digital spaces. Snap Inc. is on the cutting edge of augmented reality that can bring your personal likeness to the metaverse. Qualcomm, NVIDIA and Unity are all putting effort into developing the hardware and software that will power the metaverse.

The companies building the metaverse are those dabbling in a few specific technologies. That includes augmented reality (AR), virtual reality (VR), extended reality (XR), mixed reality (MR), blockchain and more. As a secondary market, investors need to look at the hardware companies developing access technologies for the metaverse. This includes everything from phones and tablets to VR headsets and immersive gaming rigs.

Looking at Current Metaverse ETFs

Despite the novel nature of the emerging metaverse landscape, there are actually quite a few metaverse ETFs to choose from. Many funds are still evolving as the scope and breadth of the metaverse become apparent. If you’re an investor looking more closely at the metaverse and the potential ROI associated with it, some of the most relevant ETFs to explore include:

  1. Roundhill Ball Metaverse ETF (METV)
  2. Evolve Metaverse ETF (MESH)
  3. ProShares Metaverse ETF (VERS)
  4. Horizons Global Metaverse Index ETF (MTAV)
  5. Fount Metaverse ETF (MTVR)
  6. Subversive Metaverse ETF (PUNK)

These metaverse ETFs offer a great mix of variety when it comes to metaverse exposure. They not only focus on companies like Meta Platforms (Nasdaq: FB). They’re inclusive of companies that are powering the metaverse from a hardware, software, entertainment, business and practical standpoints.

Some of the common holdings among these metaverse ETFs include NVIDIA Corporation (Nasdaq: NVDA), Unity Software (NYSE: U) and Apple (Nasdaq: AAPL). As well as Microsoft (Nasdaq: MSFT), Alphabet Inc. (Nasdaq: GOOG), Snap Inc. (NYSE: SNAP) and others.

Should You Invest in the Metaverse?

The technology sector has many investors spooked right now, and for good reason: it’s one of the hardest hit by stock market downturn in 2022. However, that doesn’t mean the sector has stopped innovating. It’s not a question of if the metaverse is coming; it’s when. Investors willing to become early adopters in its infancy will find themselves reaping huge ROI down the line when the metaverse is fully operational.

If you’re interested in metaverse ETFs and the long-term potential it offers as an investment thesis, now’s the time to buy. And, if you want to learn more about thematic investing and long-term macro investment trends, we encourage you to discover our family of investment newsletters. You’ll get expert advice delivered straight to your inbox, relevant to some of the most exciting industry trends taking shape right now.

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How do Savings Bonds Work as Defensive Investments?

As retail investors diversify outside of an equities-only portfolio, many are looking at savings bonds as an opportunity to capitalize on rising interest rates. Historically, they are one of the oldest and most trusted investment products. They’re backed by the full faith and credit of the United States government, and they offer investors options to both preserve and grow their wealth. They’re widely considered a defensive investment and tend to rise in popularity as the stock market falls on hard times.

Let’s take a closer look at savings bonds: what they are, how they work as investment vehicles and how to best leverage them into a defensive portfolio. Plus, we’ll look at the role of savings bonds within the context of a recession.

Investing in savings bonds.

What is a Savings Bond?

A savings bond is a long-term depository investment made with the United States Treasury. They offer investors a guaranteed rate of return on their money, depending on how long they hold it. There are actually two types of savings bonds investors can consider:

  • Series EE. These bonds offer a fixed rate of return that will double the face value after a period of 20 years. They’re available in denominations ranging from $25 to $10,000, capped at $10,000 per year, per taxpayer. Investors need to hold these bonds for at least one year before selling, and there’s a penalty amounting to three months’ interest if sold within five years of purchase.
  • Series I. These bonds adjust their interest rate every six months based on inflation. Like Series EE bonds, investors can purchase Series I bonds in increments ranging from $25 to $10,000, capped at $10,000 per year, per taxpayer. A type of zero-coupon bond, investors gain the full bond payout when it’s cashed in. There’s a penalty amounting to three months’ interest if sold within five years of purchase.

Savings bonds are the ultimate “set it and forget it” investments because, unlike other ones that pay interest and fluctuate based on the bond market, these investments are best held for the long-term. It’s best to invest in them when your time horizon on realizing their gains is 20-30 years.

Series HH savings bonds were also available from 1980 through August 2004. These bonds had a maturity date of 20 years and functioned similar to Series EE bonds, though they paid interest bi-annually. Investors who still hold Series HH bonds can continue to collect interest on them or cash them in at face value.

Savings Bonds vs. Other Treasuries

Savings bonds are one type of U.S. Treasury product, alongside T-Bills, T-Notes, T-Bonds and Treasury Inflation-Protected Securities (TIPS). The key difference between savings bonds and other U.S. Treasuries is rate of maturity. T-Bills mature in less than 52 weeks. T-Notes mature in less than 10 years. T-Bonds mature in 20-30 years and pay interest, unlike savings bonds, which deliver ROI at the time of redemption.

It’s often simpler to think about savings bonds as deposits that earn interest, whereas other U.S. Treasuries are debt investment products. They work similarly to a savings account.

The Major Benefits

Given the option to put your money in savings bonds vs. a savings account (or even a debt investment), savings bonds offer some excellent benefits to consider. Some of the primary reasons you might invest include:

  • The earnings they generate are exempt from state income taxes
  • You can also avoid federal taxes if you use the earnings for education
  • There’s a low barrier to entry; they are available for as little as $25
  • Redeemable with no penalty after five years
  • Backed by the full faith and credit of the United States Government

Savings bonds offer interest-earning opportunities, combined with the flexibility to either let your money grow risk-free for 30 years or pull it out penalty-free after five years. They’re also very accessible to any investor.

Are Savings Bonds Good Investments?

Many investors wonder how good a savings bond is as a defensive investment. It’s a complex question because it really depends on the nature of the investor and their reason for investing.

For young investors, they aren’t the best option because of their low interest rates. Those with a long time horizon can afford to invest in much more lucrative vehicles. This even includes defensive investments like commodities or other types of bonds. Conversely, those nearing or in retirement will find they are a very convenient investment. They offer the stability and reliability of a U.S.-backed bond, with the ability to cash in bonds if the interest rate environment changes.

Ultimately, savings bonds are typically better as instruments for wealth preservation, not generation.

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How to Use Them in a Recession

If you’re looking to hedge your portfolio and take a more defensive stance against oncoming economic hardship, savings bonds can provide stability. That said, they’re better for those seeking very long-term defensive investments. Depending on the type of one you buy (Series EE vs. Series I), each has its own grouping of pros and cons. Nevertheless, either represents the safest possible investments you can make.

Looking for tips and other strategies to hedge your portfolio against economic hardship? Discover our family of investment newsletters and take advantage of the expert advice of seasoned investors who know how to navigate the market in any conditions, including economic recession.

The post How do Savings Bonds Work as Defensive Investments? appeared first on Investment U.