How to invest in Huawei from the UK

Is Huawei a buy?

Huawei is one of the largest technology and telecommunications companies in existence today. Its best-known product is smartphones, but it also produces telecommunications equipment, routers and modems, consulting services and software.

Like many of today's large companies, Huawei started with a modest capital of 3 thousand dollars and 3 employees. It was in 1987 when engineer Ren Zhengfei founded the company in the city of Guangdong to distribute imported telephone exchanges.

During those years, China was looking to modernize the country's telecommunications and Huawei's founder saw the opportunity to scale his venture to a national telecommunications company. Thus, he interspersed the commercialization of telephone exchanges with the practice of reverse engineering from which he hoped to develop his own product.

Thus, in 1993, Huawei launched a telephone switch completely developed by them and which was better than any of those available in China at the time. And this first step was enough for Huawei to become what it is today.

Evolution of Huawei

If anything characterizes Huawei, it is the speed with which it adapts to market requirements and advances in technology.

In its evolution it went through manufacturing products based on GSM, CDMA and UMTS technologies. The production of routers and LTE telecommunications equipment, as well as its cell phones being in 2009 when Huawei would produce its first smartphone with the Android operating system.

One of its milestones was the Huawei P40 whose camera completely eclipsed all other devices available on the market at the time regardless of whether it was Samsung or Apple. There was no one who at the time did not see the advertising of the smartphone, listen or read something about it.

Subsequently, already framed in the trade war between the United States and China, Huawei was one of the sanctioned and most damaged companies. First, Google was banned from selling the Android operating system for Huawei cell phones. Secondly, because of Trump's accusations of espionage, with which he asked his allies not to maintain relations with the company.

But despite this, the company has found a way around the obstacles to the point that the sanctions have not prevented it from becoming the world's largest cell phone manufacturer. Likewise, Huawei continues to lead the development and implementation of 5G technology worldwide.

And all this just goes to show how big Huawei has become, to the point that the world's leading economy cannot fully exert its power over it.

Instruments you can operate with

What are ETFs?

Exchange-Traded Funds or ETFs are similar to index funds. They can be described as a combination of stocks and mutual funds. They can be traded like regular stocks, but include a wide diversity of assets and their commissions are much lower than those of an actively managed fund.

About Index Funds

If a long-term investment sounds like a good idea to you, and you won't need to withdraw your money in five years or maybe a decade, index funds can be the best alternative. This kind of investment is also great for beginners since it is more secure. Besides, they offer more variety.

You may have a different idea, but very few investors can beat the index (yes, you have probably heard of investors who achieve huge returns).

But putting aside some unusual cases (like Warren Buffett's), not everything is as good as it sounds: if you hear of someone who has beaten the index, it was probably for a limited time, or their fees are really high. In the end, indexing is better because commissions are minimal. Besides, past performances do not ensure a future one.

Index funds offer solutions to both concerns: their commissions are insignificant and in the long term they almost always beat active managers.

Foreign exchange

Forex or currency trading allows obtaining profits by converting one currency for another.

If you decide to trade EUR and USD, you speculate how many dollars it will take to buy a euro, hoping that the euro will rise compared to the dollar. Then, if you purchased each euro at 1.15 USD and you sell them back when they are worth 1.20 USD, that margin will be yours.

Perhaps you already deducted this, but trading with foreign exchange requires investing a lot, since variations tend to be low, or using a lot of leverage, which is always a risk. Our recommendation for those starting in the world of trading is to choose another market to begin with, since Forex is risky and complex.

You can operate with the most common currency pairs on this broker. Nevertheless, bear in mind that in this market sales are made through CFDs, which means you will not be the owner of the real asset.

What are CFDs?

If you browsed this broker before, you probably noticed that the acronym CFD appears over and over. We will come back to it, but you should know first that CFDs on this broker are only possible if you go short.

For your information, and in case you want to know about day trading cryptocurrency or other advanced practices, we will also explain concepts such as going short and leverage.

The advantage of this broker is that it allows you to bet both “in the black” and “in negative”. Let's say that you are sure that the Huawei will fall, so you clearly think “if it is going to depreciate, I'll simply wait until it does”. Nevertheless, if it really falls, it might mean extra money for you.

You can accomplish that by “going short”. Basically, it functions like this:

  • They lend you, let's say, 100 units of Huawei, valued at a total of $ 5,000 (these numbers are totally made up)
  • You sell the 100 units and earn $ 5,000
  • The Huawei devaluates from $ 50 to $ 30
  • You purchase all 100 units again, but now their value is $ 3,000
  • Then you return the 100 units
  • You will have made $ 2000, since you keep the difference

Take into account that it is much simpler than it sounds: we can summarize this whole operation by saying that by trading in Huawei you can also make money if you foretell the downs.

What is leverage?

Have you heard about “leverage”? Just in case, we'll define it briefly: trading allows you to invest more money than what you really have. For instance, if you have $ 100 and you use x2 leverage, you will be really investing $ 200.

Why using leverage and how to do it

Assuming that, for instance, you are sure that Huawei price is going up, and that you have $ 1,000 for “going long”, you must know that you have the option of investing more and making more money.

There's the possibility of requesting a credit at your bank or other financial company, but you must know that all the process takes time, and by the moment you finally get the money, Huawei might be already so expensive (if your guess was right) that investing wouldn't be convenient anymore.

Leverage is like a credit, and you will only have to click a few times to get it! You will be able to operate with much more money than what you have on the platform. It is really simple, before investing you will see the different options as in the image below:

apalancamiento

With other assets, the leverage you can choose is higher. The reason is that cryptocurrencies regularly represent medium-long term investments. However, leverage is used primarily for day trading or short-term operations. But let's see how leverage works in the practice:

  • If you decide to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 (remember that$ 1,000 was “borrowed” from the broker). 
  • A few days later, Huawei price does increases, as you assumed, and now the cost of your investment is $ 2,400 (20% more), so you decide to sell back. 
  • Once the $ 1k from leverage is deducted, you will have $ 1,400 left; which means you've earned $ 400, since the other $1,000 was yours initially.

In conclusion, by investing $ 1000 and obtaining $ 400, your net profit would be 40%. That is quite good.

But watch out: if all goes as you planned and the price rises, you will make profits. Nevertheless, if the price goes down, you will also lose more money than you invested.

Let's imagine that the asset didn't increase by 20%, but it decreased also by 20%, you won't lose $ 20 but $ 40, because of the leverage. For that reason, when using leverage it is very important to take into account Take Profit and Stop Loss.

Take Profit is used as a form of reducing risks when trading. When you enter, you can set a profit limit and ask that your position is automatically closed when the asset reaches a price. 

If you purchased Huawei shares at $ 100, you program your broker to close your operation when it reaches $ 120. That way, you make sure you won't change your mind and decide to wait a bit longer in case it keeps going up, which could make you lose it all.

Stop Loss is even more necessary, particularly if you trade with leverage, because a reduced loss with leverage can have a significant impact. For that reason, it is vital to mark a Stop Loss more conservative than that suggested by the platform.