How to invest in Walmart from the UK

Walmart business explained

Walmart, founded in 1962 by Sam Walton, is an American company that owns chains of discount department stores and warehouse clubs. Its main business is the retail sale of mass consumer goods of all kinds.

Its founder, created the company to offer quality products at very low prices in order to obtain a large volume of trade. The idea was to compensate precisely for the low prices so that the company could sustain itself and generate profits.

His idea paid off immediately, because from the very first year, Walmart had a large volume of sales that increased year after year. And along with its sales volume, what also grew year by year was the number of stores the company owned.

Thus, with such a simple business idea, Walmart went from being a warehouse in Arkansas with a few employees, to owning more than 10 thousand stores represented in some 60 different brands in 28 countries and with about 2.2 million employees worldwide.

And this without changing its business model, which is still the same today: sell cheap to sell more. Although what it has done is to reach agreements with manufacturers to provide it with products to market under its own brands.

Walmart and the stock market

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The company has been listed on the New York Stock Exchange NYSE since 1970 and since then, as the company's growth and expansion, its share price has not stopped growing. Especially in the last 10 years, when it has experienced a bullish rally regardless of the state of the economy.

Although the truth is that this is very predictable since it is a company that generates and increases its profits year after year. And behind this is the fact that their main source of revenue is what they call “groceries”, which are food products.

Knowing a little of its history and with the awareness that food products will always be the first necessity, it is easy to foresee that Walmart's behavior will remain the same in the future, that is to say, in frank growth.

Therefore, if you are looking for companies to invest in that have a good track record of performance and excellent future prospects, Walmart is one of the companies to consider.

Financial assets that exist

About Index Funds

Index funds are the best option for those interested in long-term investments, mostly for beginners. If you don't need an amount of money for the next five or ten years, index funds are the safest option.

Contrary to common perception, it is very hard to beat the market (yes, you have surely heard of managers who achieve huge returns).

But putting aside some remarkable cases (like Warren Buffett's), not everything is as good as it sounds: 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). Also, take into account that past performances do not ensure a future one.

With index funds, you won't be concerned about that: although in the long term, they frequently beat active managers, and the fees are so much lower.

Currency market

Forex or currency trading is the exchange between two currencies.

If you decide to trade EUR and USD, for instance, you speculate how many dollars it will take to buy a euro, with the expectation that after buying the first currency (the euro) it will revalue compared to the second (the dollar), to make a profit by selling it. Suppose you entered when a euro is worth 1.10 USD and you leave when a euro is worth 1.15: that margin is yours once you sell again.

Perhaps you already deducted this, but trading with foreign exchange usually implies investing a lot, because prices never increase that much, or using a lot of leverage, which could be incautious, as you know. If you are just starting in trading, we don't recommend beginning with Forex, because it's not the safest option.

The most common currency pairs are available on this broker but consider that in this market sales are made through contract for differences, therefore the underlying asset won't be yours.

About Contracts for Difference

If you browsed this broker previously, you must have noticed that the initials CFD appear over and over. We will come back to it, but you should know first that cryptocurrency operations on this broker are only CFDs when you short sell or leverage over x2 (and the platform does not even allow this).

FYI, and in case you are thinking about day trading cryptocurrency and other more advanced operations, below you will also meet concepts such as leverage and “going short”.

Even if you aren't “in the black”, you can still bet on this broker with CFDs. For instance, you have the conviction that the Walmart will go down, so perhaps you think that it is better to refrain from getting in until it actually falls. But if you really consider that it's going down, why not making some profits?

You can do that by “going short”. Here's how it works ,roughly:

  • You get from a loan 100 units of Walmart, with a total value of $ 5,000 (these numbers are entirely made up)
  • You make $ 5,000 by selling the 100 units
  • The Walmart goes from $ 50 to $ 30 (as you presumed, the value decreases)
  • You purchase all 100 units once again, but now they are worth $ 3,000
  • Then you give back the 100 units
  • The $ 2000 difference is yours

Consider that it is much easier than it sounds: we can just say that by trading in Walmart you can also make money if you anticipate the downs.

Leverage

In case you haven't heard about “leverage”, we'll describe it briefly. When trading, it's the capacity of increasing your investment without putting extra money. For example, you can enter with $ 100, but if you use x2 leverage, you will be investing $ 200.

Leverage and the importance of “Take Profit” and “Stop Loss”

Assuming that, for instance, you are positive that Walmart 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 loan at your bank, but you must know that all the process takes time, and by the moment you receive the money, Walmart might be already at a much higher price, so you wouldn't be able to invest the way you planned.

Thanks to leverage, you can obtain that amount of money just by moving a finger. It's like a loan, but much better: from the broker itself. You can get financing to operate with much more money than you actually have on the platform. It is very simple, before investing you will see the different options as in the screenshot:

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When operating with other assets you can use even more leverage. The reason: leverage is most common in short-term operations, and cryptocurrencies tend to be a medium or long-term investment. But let's deepen a bit more on how all this works.

If for your investment of $ 1,000, you use leverage x2, you will be investing $ 2,000, as we mentioned. Your broker would be “loaning” you the extra $ 1,000.

A week later Walmart valuation rises up and now the value of your investment is 20% higher, which means, you have $ 2,400 in Walmart shares. But you don't want to be too greedy, so you decide, wisely, to sell back.

You will have to give back the $ 1,000 of leverage and the net profit would be $ 400 (since the other $ 1,000 was your initial investment).

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

The trick is that the risk of losing out also increases. If everything goes according to plan and the price goes up, you will earn profits in little time; but if the opposite happens, you will also lose more really fast.

For instance: if instead of increasing by 20%, the price falls by 10%, you do not lose $ 10, but twice that figure, which means $ 20. For that reason, when using leverage it is crucial 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 Walmart shares at $ 100, you request the broker to close once it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to wait a bit longer in case it keeps going up, which could be a mistake.

On the other hand, when operating with leverage you also have to use Stop Loss, because a small fall in the price of an asset can have a big impact on your wallet. Always remember to set a Stop Loss more tight than that suggested by the broker.