How to invest in Netflix from the UK

Netflix business explained

Netflix is a company dedicated to the distribution of audiovisual content (series, movies, documentaries, among others) via streaming. There is no one today who does not know about the existence of the platform or who has not heard about any of its series.

And the fact is that Netflix is the number one of all streaming companies mainly because it is the oldest. Although it also contributes a lot the fact that it produces its own series and movies, some of which have achieved resounding success as is the case of La Casa de Papel.

Evolution of Netflix

The company was founded in 1997 in California and in 1998 began its activity with a DVD rental service by mail. In the year 2000, already with a website, Netflix started its personalized recommendation system, based on the rating of its customers.

It was not until 2007 that Netflix started its video on demand service as we know it today. However, at the beginning this service was only available in the United States and Canada, by 2011 it was already available in the rest of America and all of Europe.

But it was in 2016 when it took the big leap and began to offer its service worldwide thus becoming the great company it is today.

In-house productions

We already mentioned that Netflix produces its own series, movies, documentaries and animations. The company started with own productions in 2013 with the political drama Houses of Cards which was critically acclaimed at the time. And since then, Netflix's original productions have always given something to talk about.

Among its most famous productions we can mention:

  • Elite
  • Money Heist
  • Stranger Things
  • Castlevania
  • Narcos
  • Dark

Among many others that, although they are series designed for a specific sector, have achieved popularity among its users in general.

Their future in the stock market

The evolution of this streaming company, its ability to adapt to new times and new technologies have a positive impact on the company's valuation.

That is why its share price has gone from $15 in the initial offering to the prices we have today.

And since Netflix is a technology company, it is only natural that its rise will continue, which makes this company one of the few that should always be taken into account.

Financial instruments you can operate with

About Index Funds

Index funds are suitable for those who want to invest for the long term, mostly for beginners. If you don't need an amount of money for the next five or ten years, index funds are a secure option.

Contrary to what it may seem, very few investors can beat the index (yes, you have probably heard of managers who achieve huge returns).

But except for Warren Buffett and a couple more, all that glitters is not gold: if you hear of someone who has beaten the market, they have probably done so for a short period, or the rates are so high that it ends up being better for you to index (whit minimal commissions). Besides, take into account that past performances do not ensure a future one.

With index funds, you don't have to worry about that: although in the long term, they regularly beat active managers, and the fees are so much lower.

What is an ETF?

Exchange-Traded Funds or ETFs are a kind of passively managed fund, similar to index funds. We can say that ETFs are halfway between stocks and funds: they are publicly traded, that means they can be exchanged at any time at market price. But their advantage is that they offer more alternatives compared to stocks, and have lower fees.

Foreign exchange market

Foreign exchange trading or Forex consists, as the name says, in the exchange of currencies. It's the conversion between currencies, and the aim is, evidently, to obtain a benefit out of this.

In case you decide to exchange euros and dollars, you speculate how many dollars it will take to buy a euro, with the expectation that the first currency (the euro) will revalue compared to the second (the dollar), to make a profit by selling it. Suppose you entered when the price of one euro is 1.10 USD and you leave when the price has gone up to 1.15: consequently, you will gain that margin.

You may be thinking that trading with currencies requires investing considerable amounts, and you're right, since fluctuation in prices is never that dramatic, and if you use a lot of leverage to counter that, you will take a considerable risk. Our recommendation for those who are new in the world of trading is not to start with Forex, but with a safer and more secure market.

This broker allows exchanging the most popular currency pairs. Nevertheless, remember that Forex works with CFDs, so you will not be the owner of the real asset.

How do Contracts for Difference function?

It is possible that you have found the initials CFD all the time if you already accessed this broker. We will come back to it, but first, you should know that CFDs on this broker are only possible if you go short or leverage higher than x2 (nevertheless, the platform does not even allow this).

We will also explain concepts like short-selling and leverage, in case you are considering day trading cryptocurrency or more advanced operations.

Even if you don't have a positive balance, you can still bet on this broker with CFDs. For example: you believe that the Netflix will fall, so you clearly think “if it is going to depreciate (go down in price), 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”. More or less, this is how it works:

  • You ask someone for a loan of, let's say, 100 units of Netflix, which cost $ 5,000 at the moment (these numbers aren't real)
  • You sell them at their current price, $ 5,000
  • The Netflix goes from $ 50 to $ 30 (as you presumed, the value decreases)
  • You purchase the 100 units again, but at $ 3,000
  • Now you return the 100 units
  • You will have made $ 2000, since you keep the difference

Take into account that it seems much more tricky than it really is: we can summarize this whole operation by saying that by trading in Netflix you can also earn money if you predict the downs.

How does leverage actually work

In case you still don't know what “leverage” is, we'll put it short. When trading, it's the capacity of enlarging your investment by borrowing money from the broker. For example, you can enter with $ 100, but if you leverage x2, your initial investment will be $ 200.

Everything you need to know about leverage

Assuming that, for instance, you are sure that Netflix price is going up, and that you have $ 1,000 for “going long”, you must know that you can increase your investment and earn higher profits.

There's the possibility of asking for a loan at your bank, but it is a process that takes time, and when you receive the money, Netflix might be already so expensive that trading wouldn't be convenient anymore.

Leverage is just like a credit, and you will only have to click a few times to get it! your broker allows you to invest (and earn) 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

When operating in different markets you can use more leverage. The reason is that leverage is most common in short-term operations, and cryptocurrencies tend to be a medium or long-term investment. That said, I'm going to explain better how leverage works:

  • If you want to invest $ 1,000 and you use leverage x2, you will be starting with $ 2,000 ($ 1,000 was borrowed from the broker). 
  • Then, turns out that Netflix price does rises, as you thought, and now the price of your investment is $ 2,400 (20% higher), 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 from the beginning.

By starting with $ 1000 and getting $ 400, you'll be earning 40% of your investment. That is pretty good.

Does it sound too good? The trick is that the risk of losing out also increases. If everything goes as planned, you will earn more money in less time; however, if the value of the asset goes down, you will also lose more in less time.

Let's suppose that the asset didn't increase by 20%, but it decreased also by 20%, you won't lose $ 20 but double, $ 40. Because of that, the concepts of Take Profit and Stop Loss are so important when using leverage.

Take Profit is a trading limit you can set for your assets: you program your operation and ask the platform to sell them once they get to a point above the entry price. For instance, you can buy Netflix shares at $ 100 and request that your position is closed automatically when it reaches $ 120. It is very useful to avoid being blinded by enthusiasm: a 20% profit is usually very good, but once you see it goes up, you might want to gain a bit more and decide to wait, but this could be a mistake. So, Take Profit helps you to trade more safely.

Stop Loss is even more necessary, particularly if you trade with leverage, since a small loss with leverage can be fatal for your wallet. You always need to mark a Stop Loss more tight than that suggested by the broker.