How to invest in JP Morgan from Nigeria

JP Morgan business model

JP Morgan is a U.S. financial institution founded in 1871 from which originated the three largest banks in the world: JP Morgan Chase, Morgan Stanley and Deutsche Bank. Currently, when referring to JP Morgan, we are talking about JP Morgan Chase, which was born from the merger between the original bank and Chase Manhattan Corporation in 2000.

Chase Manhattan Corporation also has a long history, dating back to 1824 with the name of Chemical Bank. It was for several periods the largest bank in the United States in terms of both deposits and investments.

Since its foundation, Chemical Bank grew and merged with other banks, and in 1996 it acquired Chase Manhattan Corporation. It kept this name until 2000 when it merged with JP Morgan and formally became JP Morgan Chase & Co.

The merger of these two large banks gave rise to a giant that is considered the oldest financial services institution in the world. In addition to being the largest having as assets the astronomical figure of 3,689,336,000,000,000 dollars, that is, 3.6 trillion.

JP Morgan Chase as an investment

The phrase “too big to fail”, which has economic implications behind it, fully describes today's JP Morgan Chase. It is virtually impossible for this bank to fail, regardless of the state of the economy.

And if it did, it would be immediately bailed out by the U.S. government as has happened with other banks. This is because, given its size, it would have huge implications for the economy as a whole if JP Morgan Chase were to disappear.

However, as we have already said, it is practically impossible for this to happen because JP Morgan Chase, together with the FED, has bailed out other banks. Such is the magnitude and importance of this financial institution.

So, if an investor is looking for a company where his money is safe in every way, JP Morgan Chase is the best possible choice. Because to conclude, the shares of this company have good yields and pay dividends to its investors.

What financial instruments can you trade?

Exchange-Traded Funds

What do you know about Exchange-traded funds or ETFs? They are passively managed funds, known for merging the benefits of stocks and mutual funds, because they can be exchanged at any moment in the market, but have much more diversity and the fees are significantly lower.

About Index Funds

Index funds are most adequate for those planning to invest for the long term, particularly 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 common perception, it is very hard to beat the market (although you have probably heard of managers who obtain huge returns).

But besides Warren Buffett and a couple more, all that glitters is not gold: if you hear of someone who has beaten the benchmark, it was probably for a short time, or their rates are really high. In the end, indexing is better because commissions are minimal. Also, take into account that if something happened once or twice, it doesn't mean necessarily that it will happen again.

Index funds offer solutions to both concerns: their fees are insignificant and they regularly beat active managers, but in the long term.

How do Contracts for Difference work?

You probably have seen the initials CFD more than once if you entered this broker before. Before we explain what this is, you must know that cryptocurrency trading on this broker is only CFD if you short sell or leverage over x2 (and the platform does not even allow this option).

FYI, and in case you want to know about day trading cryptocurrency and other advanced practices, you will also find concepts such as short-selling and leverage.

this broker lets you bet both “in the black” and “in red”. Let's say that you have the certitude that the JP Morgan will go down, so probably you think that the best thing to do is wait until it does and then go in. But if it really falls, it might mean extra money for you.

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

  • You obtain from a loan 100 units of JP Morgan, with a total value of $ 5,000 (these numbers are fictional)
  • You make $ 5,000 by selling the 100 units
  • As you guessed, it devaluates, and the unit of JP Morgan now costs $ 30 instead of $ 50
  • You buy all 100 units one more time, but at the current value, $ 3,000
  • Now you pay back the 100 units to the loaner
  • The $ 2000 difference is yours

Consider that it seems much more tricky than it really is: we can just say that by trading in JP Morgan you can also earn money if you predict it will fall.

Trading with leverage

Do you know what leverage is? Just in case, we'll define it shortly: trading allows you to invest more money than what you really have. That is, if you get in with $ 100 and you use x2 leverage, the amount of your investment will be $ 200.

Leverage, Take Profit and Stop Loss

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

You could consider requesting a loan, but it is a process that takes time, and by the moment you finally get the money, JP Morgan might be already at a much higher price, so you wouldn't be able to invest the way you planned.

Leverage is like a credit, but it is only a few clicks away! You will be able to invest (and earn) much higher amounts than what you actually have on the platform's wallet. It is very simple, before investing you will see the different options as in the screenshot:

apalancamiento

Within other markets, the leverage you can choose is higher. Why? Because leverage is most common in short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. Let's talk a bit more about how leverage works.

If you have the $ 1,000 and use leverage x2, your investment is 2 * $ 1,000, that is to say, $ 2,000. Your broker would be “loaning” you the extra $ 1,000.

A couple of days pass and turns out that you were right: JP Morgan price has risen by 20% and your money has appreciated reaching $ 2,400. Ok, don't be greedy, it's time to sell.

Obviously, the 1k $ from leverage will be deducted, and you'll have $ 1,400 left, of which $ 1000 is the money you put in yourself, so the net profit is $ 400.

In conclusion, by investing $ 1000 you can make a profit of 40% (in the case you earn $ 400). That is pretty decent.

But there's always a downside. If everything goes ok and the asset increases, you will make profits. Nevertheless, if the asset decreases, you will also lose more money in the blink of an eye.

For instance: if the price falls by 10%, you do not lose $ 10, but $ 20. Because of that, the terms “Take Profit” and “Stop Loss” are fundamental when trading with leverage.

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 bought JP Morgan shares at $ 100, you program the broker to close when 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 rising, which could be a mistake.

On the other hand, when using leverage you should always use Stop Loss, because a small fall in the price of an asset can lead to a substantial loss. Consider that your broker will recommend a limit for Stop Loss, but you should set it closer to current price than that.