Qualcomm is an American technology company that is well known because its chips are widely used in the smartphones industry. And among all the chips it manufactures, surely the best known is the Snapdragon processor, which is preferred by most smartphones manufactors.
This company, founded in 1985 in California, initially offered satellite location and messaging services to long-distance transport companies. At the same time it produced integrated circuits for equipment specialized in digital radio communications as well as its first patents, which would be essential for the company.
It would be in 1990 when Qualcomm has the first approach with cellular technology, particularly with CDMA, which would define the future of the company. This fact plus its patents mark a milestone for Qualcomm because, although it is known for Snapdragon, its real business is in cellular technology patents.
In those years, Qualcomm developed a lot of wireless technology that it filed and patented in the United States. As time went by, its patents would be taken as standard in the cellular industry and for wireless technologies.
That is why its main business and source of income is the licensing of patented technologies. And all, but all cell phones are dependent and use in one way or another some of Qualcomm's patents. Thus, Qualcomm's licensing fee is between $20 and $30 per mobile device produced.
This is an outrageous figure for the sector, being 10 times higher than the average and for which Qualcomm has entered into legal disputes in the United States for monopoly. Although Qualcomm has come out of this with flying colors and has argued that the price for using its patent is higher because its patents are more important and indispensable.
As you can imagine, Qualcomm receives a monstrous income from patent licensing alone. This allows the company to pay quarterly dividends to its investors for an average of $2.6 per year. In turn, these two facts are reflected in the positive returns that Qualcomm's stock has on the stock market.
If we add to this the fact that the legal battles that Qualcomm has won basically allow it to continue with its patent monopoly, we can affirm that this company is one of the best to invest in the long term.
What are the instruments you can trade?
Meet the Exchanged Traded Fund
Have you heard about Exchange-traded funds? They are passively managed funds, known for combining the advantages of stocks and mutual funds: they can be traded regularly at market price, but have much more diversity and the rates are significantly lower.
This is the best option for people who can invest in the long term, especially for those who are starting to trade, because it is inexpensive, diversified, and the risk is lower.
Unlike a lot of people think, beating the benchmark is far from being a piece of cake and very few fund managers have done it, apart from some famous cases.
In practice, all that glitters is not gold: if a fund manager achieves to beat the market, it is only for a short time or on a specific occasion. Or perhaps they would charge very high fees and indexing would be a better decision anyway.
Index funds offer solutions to both concerns: their commissions are insignificant and in the long term they tend to beat active managers.
What is known as Forex trading consists in the exchange of currencies. It's the conversion between currencies to make a profit through the operation.
If you decide to exchange EUR and USD, you speculate how many dollars it will take to buy a euro, with the expectation that the euro will increase compared to the dollar. Therefore, if you purchased each euro at 1.15 USD and you sell them back when they cost 1.20 USD, that margin will be yours.
You may be thinking that this form of trading requires investing considerable amounts, and that is correct, because fluctuations are usually minimal, and if you use a lot of leverage to counter that, you will take a considerable risk. If you are just starting to trade, it is not a good idea to begin with this market, because it is very risky and complex.
The most known currency pairs are available on this broker but bear in mind that this market functions through CFDs, thus you will not be the owner of the real asset.
What are CFDs?
You probably have seen the acronym CFD now and then if you entered this broker before. We will explain exactly what this means, but you should know first that CFDs on this broker are only possible when you short sell.
We will also refer to concepts like short-selling and leverage, in case you are interested in day trading cryptocurrency or more advanced operations.
The good thing about this broker is that it allows you not only to bet if you are “in the black”, but through CFDs you can also bet “in red”. For instance, you are sure that the Qualcomm will fall, so perhaps you think that it is better to refrain from getting in until it actually falls. Nevertheless, if it really falls, it might mean extra money for you.
You can do by “going short” which consists in something like this:
- You obtain from a loan 100 units of Qualcomm, with a total price of $ 5,000 (these numbers are fictional)
- You make $ 5,000 by selling the 100 units
- As you supposed, the price falls, and the unit of Qualcomm goes from $ 50 to $ 30
- You buy the 100 units again, but at $ 3,000
- You pay back the 100 units to whom made the loan in the first place
- You will have made $ 2000, since you keep the difference
It is really simple. Just keep in mind that by trading in Qualcomm on this broker, you can make a profit when you anticipate the price will fall.
How does leverage work
If you still don't know what “leverage” is, we'll describe it briefly: it is the possibility to use a higher amount than you actually have. That way, if you start with $ 100 and you leverage x2, your initial investment will be $ 200.
About leverage, Take Profit and Stop Loss
Let's pretend that you are confident that Qualcomm will rise, and you consider “going long, but you only have $ 1,000 available. However, it is possible to put more and earn higher profits.
There's the possibility of asking for a loan at your bank or other financial company, but you must know that all the process takes time, and when you receive the money, Qualcomm might be already so expensive that investing wouldn't be convenient anymore.
With leverage, you can obtain that amount really easily. It's like borrowing money, but much easier and quicker, and with the benefit that you will be getting it directly from your broker which will let you invest much more than you have on the platform's wallet. Before trading, you will be able to choose between the different leverage options as in the image below:
Trading with other assets allows you to use more leverage. This is because leverage is most used for short-term operations or day trading, and cryptocurrencies tend to be a medium or long-term investment. But let's see how leverage works.
You start with $ 1,000 and decide to use leverage x2, which means you would have $ 2,000 to invest (the extra $ 1,000 to reach $ 2,000 are “borrowed” from your broker).
A couple of days pass and turns out that you were right: Qualcomm price raises its price by 20% and the value of your investment is now $ 2,400. But you don't want to take too much risk, so it's time to sell.
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. That is pretty good.
It may sound too good to be true. The trick is that the risk of losing out also increases. If everything goes as planned, you will earn profits in little time; but in the opposite case, you will also lose more really quickly.
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. Because of that, the terms “Take Profit” and “Stop Loss” are crucial when using 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 Qualcomm shares at $ 100, you program the broker to close your operation when it reaches $ 120. That way, you make sure you won't be blinded by greed and decide to keep waiting in case it keeps going up, which could be a mistake since the price could go down again really fast.
Stop Loss is even more necessary, especially when operating with leverage, since a small loss could have a significant impact on your wallet. You always need to set a Stop Loss more conservative than that suggested by your broker.