Are you interested in trading the financial markets but unsure where to start? It may be far removed from the slick city trader stereotype, but your arts and crafts hobby could come in handy when looking for opportunities to trade.
A specialist subject is a good place to start
Warren Buffet, the most successful investor of the 20th century, claims it’s best to invest in the things you know the most about. For example, you wouldn’t buy shares in a company without understanding the business model and how the company makes money. While you may need to develop your trading skills before putting your capital at risk, the specialist knowledge acquired through a hobby can give you a unique insight into trading opportunities.
Online currency trading may be a viable option for investment, but you should at least know the basics on trading to successfully trade online. By choosing to invest in something you’re passionate about, doing your research won’t feel like a chore and will enrich your hobby in return.
Crafts are big business
It’s hard to know the exact numbers, but analysts estimate a total of £3 billion is spent each year on crafts like knitting, embroidery and model making. And if you’ve been into your hobby for a long time, it won’t have escaped your notice that many more people have followed suit and adopted a ‘make do and mend’ attitude since the recession.
Unpick your supply chain
Ask yourself if it’s possible to invest in any of your suppliers, or their parent companies? If you’re increasingly heading to the supermarkets for your bits and bobs, that may be where the real opportunity lies.
Last year Poundland cashed in on the loom band craze, while Aldi and Lidl sold discounted craft supplies and stationary – it’s no surprise that in such a competitive environment, Hobbycraft’s annual profits were almost halved. Take a look at your own buying behaviour and what it signifies; if others in the craft community are doing the same, you may have cottoned on to a trend.
…And your raw materials
This way of looking at the markets doesn’t end with the where you buy your tools and materials. It’s possible to trade commodities and entire sectors, which is great news if you’re knowledgeable about the production and distribution of cotton, wool, metals or wood.
Know the tools of your trade
Do you sell your handmade goods or buy cheap supplies online? You’re probably familiar with the inner workings of eBay and PayPal if you sell goods or crafts online . Last year, the auction site agreed to spin-off PayPal into a separate company during the second half of 2015.
As a regular user, do you think PayPal will succeed without the weight of eBay behind it? PayPal is pretty popular with people who buy or sell stuff online. There are other options though. Know what works best for you and stick to the payment system that works best in your industry.
There are also rumours of a stock market flotation for Etsy in the next few years. The sellers’ site has been profitable since 2009, and investors are already drawing comparisons with eBay, whose initial public offering in September 1998 raised more than $60 million.
How do the fees you get charged for using sites like Etsy and eBay stack up? High charges may be seen as a revenue stream, and therefore a good thing, by investors. But if you know the costs mean crafters are turning away in droves, it could be a warning of future profit losses.
If you feel daunted by the financial markets, remember it may just be that you’re looking for inspiration in the wrong places – follow Mr Buffett’s lead and start with the hobbies closest to your heart.
Spread bets and CFDs are leveraged products and can result in losses that exceed your deposits. The value of shares, ETFs and ETCs bought through a stockbroking account can fall as well as rise, which could mean getting back less than you originally put in.