Majority of the world’s economies are driven by credit, which means that credit institutions make very prime ground for investors looking to build up their investment portfolios. According to research, consumers have an average of between 2-3 credit cards. In addition, fewer credit card holders default on their credit card balances or make late payments.
This means that the average credit card company has seen a rise in their level of profitability, especially because they offer more favorable terms like cheaper credit card machine rates due to the high competition.
There are three main ways to invest in credit card companies, and these are given below:
- Mutual funds
Mutual funds provide investors a unique opportunity to enjoy returns from credit card companies while simultaneously maintaining a hands-off approach towards management. With mutual funds, active management of your portfolio is carried out by a specialized fund manager, whose job is to study market trends and find out how best to maximize returns for their clients.
When you place your money in a mutual fund, you don’t directly invest in a given company, unlike individual stock purchasing. Instead, you acquire a diversified investment pool, brought together by industry type of other similar defining characteristics.
If you want to invest in credit card companies for instance, you will place your money in a financial services mutual fund, which is made up of brokerage firms, mortgage companies, banks and of course credit card companies.
- Exchange-traded funds (ETFs)
ETFs resemble mutual funds in the sense that they are also made up of a group of stocks bunched together. Therefore, investment in ETFs offers natural portfolio diversification. However, they are different from mutual funds in that the fund manager buys and sells throughout the day like they would for individual stocks. Mutual funds, on the other hand, are bought from a mutual fund company at the end of every trading day according to the net asset value of the fund at that time.
ETFs require more passive management, which is a benefit for more experienced traders, since it gives you greater autonomy over your investment, allowing you to spend less in fees for brokerage services. For those who need guidance however, mutual funds are a superior option to ETFs.
- Individual stock purchases
Buying individual stocks allows you to invest in a single credit card company of your choice, without having attached to stocks from other companies. All you need to do is gain access to the stock exchange and buy the number of shares you want in the credit card company that you choose.
However, this method comes with inherent risks, for instance if you invest in just one credit card company and their stock prices tank. Even when buying stocks from individual companies, you want to spread out you investment in many bases, which will protect you from big losses in the event they occur.
Nonetheless, if you are a skilled investor and have studies the market long enough, you can realize high returns by carefully selecting your stock portfolio rather than relying on ETFs or mutual funds.
The author is a specialist credit and investment management expert, with over a decade’s experience in the field. To enjoy cheaper credit card machine rates visit //pymntadvisors.com