In the traditional financial world, there are more questions than answers to be found right now. Various markets are on a steep downhill trend, and there seems to be no improvement in sight. As a result, there is a lot of fear and panic to be found among traders. Meanwhile, the Royal Bank of Scotland appears to have thrown gasoline on the raging fire by advising people to “sell everything” if they want a return of capital in the near future.
Royal Bank of Scotland Focuses on Capital Returns
Investing in stocks and assets has always been about making a return on capital in the long or short term. When making an investment, traders expect to see their initial amount back and make a healthy profit along the way. In some cases, they would take a loss, and get out of the market before losing even more money.
That situation seems no longer feasible, as investors are taking the return of investment approach, rather than expecting a return on investment. With the financial markets currently in turmoil, traders should consider themselves lucky if they can get their original deposit back out without any losses.
Or that’s at least what the Royal Bank of Scotland seems to think, as they have advised their clients for a major economic shakeout, as well as a global deflationary crisis. If their worst case predictions would become as reality, major stock markets will lose 20% of their value in the near future. Furthermore, oil prices would continue to bottom out, and reach a low of $16 USD per barrel.
Things started going downhill at a rapid pace once China started devaluing the Yuan on purpose. As a result of this action, a major correction has taken place, and it is only a matter of time until the global financial market feels its effects on a large scale. Equities and credit are a very riskymarket right now, and there are very few instruments left for traders to protect their wealth.
Royal Bank of Scotland Credit Chief Andrew Roberts stated:
I expect European and Wall Street stocks to plummet by as much as ten to twenty percent. The FTSE 100 will not be spared either, as they will face even bigger losses due to their risky investments in energy and commodities companies. Especially London will feel the brunt of a negative shock, as traders invested in oil and mining companies will face a harsh reality.
While a warning by a major bank regarding the current financial outcome is not that uncommon, Royal Bank of Scotland is not the only one advising investors to prepare for the worst. UBS, while insisting there is still a peak to come for the global credit cycle, remains wary of how low oil prices will influence consumer spending in the next few months. Lower prices do not automatically mean consumers will start stocking up on things.
Ignoring the reality that is staring every investor in the face would be a huge mistake. Over the past ten years, the global economy has been taken major hits left, right, and center. Instead of addressing the key issues, policymakers rested on their laurels and let these events transpire without as much as batting an eye. But luckily for all investors and traders around the world, there is a viable solution to the financial woes of today.
Bitcoin Provides Something Unique & Less Volatile
Taking the advice from RBS to heart, investors should be looking to diversify their portfolio by putting their money into something that can guarantee a return of capital right now. While the most obvious choice would be to invest in bonds or anything else offered by a government or bank, a smart investor will look beyond the realm of traditional possibilities.
Bitcoin makes a perfect candidate for not only providing a return of capital but also a return on capital in the long run. Unlike traditional stock markets, the Bitcoin price is not negatively affected by volatile price swings anymore. In fact, the popular digital currency has never been more stable than in the past 13 months.
Even though Bitcoin may remain a risky investment for those people looking for a return on investment, the alternatives are even riskier right now. Bonds or high-value stocks are the last places people should put their money right now, as these funds will be in full control of banks. With Bitcoin, even novice investors can move their funds in and out of the currency at any given time, using online services like Uphold, for example, rather than locking it away for several months or years.
Investing in Bitcoin is not about short-term gains or losses, as the digital currency is inching towards maturity. Over the past 13 months, the Bitcoin price has been rising slowly, which could be seen as a hint of things to come. One thing to keep in mind is how Bitcoin investments are a multi-year plan, rather than a get-rich-quick scheme.
What are your thoughts on Royal Bank of Scotland’s advice? Should investors consider alternatives such as Bitcoin? Let us know in the comments below!
Source: Telegraph UK
Images courtesy of Shutterstock, Royal Bank of Scotland