How to invest in Zoom from Nigeria

Should I invest in Zoom?

Zoom Video Communications, the company behind Zoom video conferencing software, is an American company founded in 2011 by Eric Yuan. And although it has been embroiled in many controversies over security issues, Zoom has seen impressive growth.

Yuan's idea was to develop software that would allow people to see each other regardless of distance and without the need to travel. It was this idea that gave rise to Zoom, although it was not really something new because, at the time, several companies were already offering the service.

However, Zoom was more popular than any other, mainly due to its ease of use and the fact that it was free of charge. Thus, in the midst of the technological revolution represented by smartphones, Zoom offered its software free of charge for computers, laptops, tablets and smartphones.

Zoom's business model

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As you may already know, Zoom is still free, you can download the program, install it and use it without paying anything. But then the question arises, how does Zoom make money? And the answer is very simple: with subscriptions to a “premium” version.

Zoom has been involved in several controversies regarding the security of the application since the free version does not secure the data. And although the company has publicly apologized for this, the reality is that this is where its business model lies.

Basically, if you use it for free, your video calls are not encrypted, the room is unprotected and the data does not travel directly between participants. The latter is the most controversial because part of the Zoom communications go through Chinese servers where, by law, the government has the right to record the data.

But, if you use the paid version, all problems are magically solved. Your video conferences are private, the data is encrypted and travels from one person to another directly without anyone being able to “read” it. It's that simple how they make money.

And despite this controversy, Zoom has emerged victorious as since its IPO in April 2019 this company has not stopped growing while others disappear. And we are not only referring to the financial market, but also to its growth in the number of users which in the long run means higher revenues and a better valuation of this company.

Instruments you can trade

What is an ETF?

What do you know about Exchange-traded funds? They are passively managed funds, known for merging the benefits of stocks and mutual funds: they can be exchanged regularly at market price, but include a much wider diversity of assets and the fees are significantly lower.

About Index Funds

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 safer.

Perhaps you have a different idea, but it is very hard to beat the market (although you have probably heard of managers who obtain huge profits).

But putting aside some remarkable cases (like Warren Buffett's), not everything is as good as it sounds: when someone brags about having 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 in the past it doesn't necessarily represent a regular behavior.

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

Currency market

Forex or currency trading is the exchange between two currencies.

In case you decide to trade EUR and USD, you speculate how many dollars it will take to buy a euro, expecting that the euro will raise its price compared to the dollar. Then, if you bought each euro for 1.15 USD and you sell them back when they cost 1.20 USD, you'll be earning that difference.

As you may have deduced, this type of trading requires a large capital, because prices never increase that much, or using a lot of leverage, which implies an extra 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.

Most currencies are available on this broker but take into account that in this market sales are always made through contract for differences, so the underlying asset won't be yours.

About Contracts for Difference

You probably have found the initials CFD all the time if you entered this broker before. We will come back to it, but first, you should know that cryptocurrency trading on the platform is only CFD when you short sell.

We will also refer to concepts such as leverage and “going short”, in case you are interested in day trading cryptocurrency or more advanced practices.

The advantage of this broker is that it allows you to bet both “in the black” and “in red”. Let's say that you believe that the Zoom will go down, so perhaps it is obvious to think “if it is going to depreciate or go down in price, I'll just wait until it does”. Nevertheless, if you really consider that it's going down, why not making some profits out of that?

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

  • You ask for a loan of, let's say, 100 units of Zoom, which cost $ 5,000 at the moment (these numbers aren't real)
  • You sell the 100 units at $ 5,000
  • The Zoom goes from $ 50 to $ 30 (as you predicted, the value decreases)
  • Again, you buy the 100 units, but now their value is $ 3,000
  • You return the 100 units to the loaner
  • You save the $ 2000 difference!

It is far more simple than it may seem. Just bear in mind that by trading in Zoom on this broker, you can make a profit if you anticipate downs in the price.

How to use leverage in trading

In case you are not familiar with the term “leverage”, we'll describe it briefly. When trading, it's the capacity of increasing your investment without putting more money. For example, you can enter with $ 100, but if you leverage x2, your initial investment will be $ 200.

About leverage, Take Profit and Stop Loss

Assuming that, for instance, you are sure that Zoom 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.

You could consider asking for a credit at your bank, but you must know that all the process takes time, and by the moment you receive the money, Zoom might be already so expensive that trading wouldn't be convenient anymore.

Leverage is like a credit, but it is only a few clicks away! You will be able to invest (and earn) much more than what you have on the platform's wallet. Before trading, you will be able to choose between the different leverage options as in the screenshot below:

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With other assets, the ability to leverage is greater. Why? Because cryptocurrencies are a value that is invested in the medium-long term. However, leverage is used especially for short-term operations or day trading. But let's explain how this works in the practice.

If for your investment of $ 1,000, you use leverage x2, you will be investing $ 2,000. The broker puts the remaining amount to reach that figure.

A few days pass and, indeed, you were right: Zoom price has risen by 20% and your money has appreciated reaching $ 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).

As you can see, with $ 1000 you get a profit of $ 400, no less than a profit of 40%. Not bad, right?

Still wondering where the catch is? The trick is that the risk of losing out is also there. If everything goes as planned, you will earn profits in little time; but if the opposite happens, you will also lose more really quickly.

Supposing that the price 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 operating with leverage it is very important to be familiar with two other concepts: 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 bought Zoom shares at $ 100, you program the broker to close once it reaches $ 120. That way, you make sure you won't change your mind and decide to keep waiting in case it keeps rising, which could be a mistake.

Stop Loss is even more important, mostly if you trade with leverage, since a reduced loss with leverage can be tragic for your wallet. Always remember to establish a Stop Loss more conservative than that suggested by the broker.