How to Make Money Online Without Having to Hold Inventory

Inflation has reached record levels which is seriously impacting the daily lives of average Americans. While the Federal Reserve tries to control it through lowering interest rates and offering monetized loans, there is another way to combat hyperinflation.

Many investors are discovering the exciting world of investing in foreign currency trading. Thanks to the rise of the U.S. dollar, it is easier than ever to profit from buying and selling foreign currency. The best part? There is no need to hold physical dollars or euros in your portfolio. All you need are virtual dollars. That’s right, you don’t need to own any currency to profit from financial movements in the foreign exchange market. You can do so with zero dollars deposited to your account. This form of investment is also know as ‘Long-Term Capital Preservation’ or ‘LTCP’. We examine why this is a uniquely American innovation and how you can get involved.

Why Did the Government Invent ‘Long-Term Capital Preservation?’

Before we answer that question, let’s take a step back and examine the state of inflation in America. In the year 2018, the Consumer Price Index (CPI) rose by 4.4 percent. That is a whole lot of inflation, which breaks down to 12.2 cents per hour worked. With the cost of everything from groceries to gas pushing upward, the costs of everyday living are on the rise. In 2019, the CPI is predicted to reach 5 percent, which would break down to 18.3 cents per hour worked. That is why the government came up with ‘Long-Term Capital Preservation’. To keep long-term investment viable, we need to find ways to keep inflation at bay.

How Long-Term Capital Preservation Works

In broad terms, long-term capital preservation is a strategy where investors trade in long-term assets, such as stocks, for shorter-term instruments, such as Treasury bills. Since short-term Treasury bills are considered safe havens, investors have flocked to them in search of capital preservation. That has led to an increase in the demand for these bills, and the US dollar in general. As a result, volatility in the foreign exchange market has decreased, offering more stability to long-term investors. What are a long-term asset and a short-term asset? Think investments that you plan to hold for a year or more, vs those you plan to hold for a matter of days.

Here is how it works. Say you have $1,000 to invest in the market. You can take that money and purchase a one-year Treasury note, or you can divide the money between 10 different stock certificates, all of which have a five-year term. In the first scenario, you are placing a short-term asset on your portfolio; in the second, you are investing in a long-term asset. In general, short-term assets are considered more risky than long-term ones. However, as long-term assets appreciate in value, so do short-term ones.

For example, the price of a one-year Treasury note is currently around 103.8 percent of its value a year ago. That means if you have a dollar invested in a one-year Treasury note, you would now be sitting on $1,030.23. In comparison, if you had invested the same dollar amount in a long-term stock, the value would be $1,030.23 x 1.03 = $1,073.46. That is a 15.7 percent appreciation over the course of a year, which is a great return on investment!

Is Long-Term Capital Preservation a Safe Haven for Investors?

Just as the U.S. dollar serves as a safe haven for foreign travel to America, long-term capital preservation is viewed as a safe haven for investors. Short-term security issues such as the recent Coronavirus pandemic served as a reminder that investing in the stock market is not always the wisest course of action. Since long-term capital preservation offers investors the opportunity to preserve capital and ride out stock market swings, many have turned to it as a vehicle for their equity allocation.

While the stock market has taken a hit as a result of the coronavirus pandemic, long-term capital preservation has emerged as a better choice for investors. According to the American Association of Individual Investors, 60 percent of investors are currently in some form of long-term investment. That is up from 50 percent in 2017 and 42 percent in 2016. Over the past year, long-term capital preservation has provided investors with an opportunity to ride out the storm and retain some of their equity.

Many economists and pundits refer to the ‘great compression’ that occurred in the middle of March as the U.S. stock market plunged over 60 percent. On March 13, the S&P 500 fell to 1183 points, its lowest level since December 2008. At one point, the S&P 500 was down nearly 90 percent from its all-time high, a correction that was larger than any other since the great depression of the 1930s. At the same time, the yield on the 10-year Treasury note fell to a record low as investors ran for the exits.

It took nearly a year for the S&P 500 to recover and reach its pre-pandemic level. During that time frame, long-term capital preservation emerged as an effective strategy for investors who were looking for a safe haven. In fact, the S&P 500 recently surpassed its previous high, closing above 2500 in September and as recently as October, 2020. While it remains to be seen if we will see record-breaking prices again, considering where we are in the pandemic, it is quite possible that the stock market will reach new highs.

The lesson to take away from this is that, in times of uncertainty, it is always important to consider what type of investment portfolio you have built. One that is heavily weighted toward cash will likely not be as effective during a time of crisis as one that is made up of equity investments. While we may not like to admit it, the U.S. dollar is seen as a safe haven by many investors because it is seen as a flight to safety during times of crisis.

The Rise of the U.S. Dollar

Even if you don’t own a single share of stock, you are impacted by the rise of the U.S. dollar. Every day, the U.S. dollar is exchanged for other currencies across the globe, resulting in a modest gain for American investors. As the dollar rises, the value of investments made in other currencies fall, providing American investors with a daily currency boost.

The dollar rose significantly against a number of foreign currencies in 2019, with the Chinese yuan and the Swiss franc two of the biggest victims. Since the dollar is a ‘safe haven’ for investors during times of uncertainty, many are seeking exposure to this currency. That has led to a rise in the popularity of forex (short for ‘foreign exchange’) trading, also known as currency trading.

Why Is Currency Trading Popular Now?

The recent escalation of the coronavirus pandemic in late March 2020 served as a wake-up call for investors. For one thing, it showed that even the most robust economies can be susceptible to global catastrophe. For another, in some cases, the only survivor may be the fittest, meaning that the wealthy and the well-connected will bear the burden of the pandemic more than regular citizens. Currency trading provided an outlet for people seeking safe havens during this time of uncertainty, making it one of the most popular forms of investment among millennial and Generation Z investors.

How to Make Money Online Without Having to Hold Inventory

If you want to make money online without having to hold inventory, diversifying your portfolio into a variety of tradable securities, such as stocks, bonds and cryptocurrencies, is the way to go. One of the safest and most effective ways of doing this is through currency trading. The world of forex is extremely complex and it is essential that you learn the basics before you even think about entering the market. Take the time to learn how to read a stock chart and keep track of the fundamental developments in the economy. Once you can do that, you can go anywhere, click on any link and make money online. All you need is a reliable laptop and a stable internet connection.