In recent years, due to a considerable decrease in economic growth caused by the coronavirus pandemic, many organizations and corporations decreased their volumes of production; hence their incomes decreased correspondingly. Therefore, it is the question of investing that has recently been worrying the majority of shareholders and corporate CEOs. Moreover, the importance of the nearest predictions about the investing and economic situation made by accountants significantly increases, and such investigations and calculations become more valuable. In this case, Henderson and Co. face a similar problem of planning investment volumes and sums, as well as their divisions, for the upcoming year.
Firstly, such types of investment as cash and commodities can be suggested as one of the most low-risk types of money investment. Milano and Chew (2020) state that the cracks in the economic system, regardless of their negative effects, generate opportunities for new business models development, innovation, and an increase in creativity. Hence, based on the statement, new ways for investment and earning an additional profit can be found. Based on the overview of the current situation in diverse markets, it can be predicted that such natural elements and chemical resources such as crude oil will increase in price. Due to the accelerating production of various anti-corona goods (masks, gloves, visors, additional equipment), manufacturers utilize higher amounts of natural resources; hence greater demand met by the scarcity of the needed elements will lead to a rise in their prices. Therefore, the investment in this sphere of production and companies manufacturing medicinal protective equipment would be quite beneficial for the Henderson and Co. company. However, the investment in gold that is generally taken as one of the most profitable options would not be relevant for the company. The prices on gold have a tendency to uncontrolled and abrupt fluctuation; therefore, they represent an unreliable and irrelevant source of probable profit earning.
The second option that might bring the highest incomes to Henderson and Company is investing in bank products. In addition, during the COVID-19 period, the utilization of web money, banking services, and electronic money showed a significant rise; hence, it can be predicted that with the continuation of the pandemic, online payments will almost fully substitute cash. This investment area is rather innovative; therefore, it is correlated with some risks that are greater in comparison with cash and commodities types; however, this type could heighten the company’s incomes and increase profitability. In addition, bank products include certificates of deposit, money market accounts, or savings accounts that could be utilized as an alternative as well. According to Wild and Shaw (2020), long-term investments cannot be easily converted to cash in short term; however, are quite beneficial. In comparison, saving money is better in the short term and provides lower financial risk; however, companies aim to achieve high long-term benefits; hence investing is recommended regardless of higher financial risks.
One of the integral parts of investing is following the trends and supporting the companies that take the willing positions in the market. Moreover, Henderson and Co. should be in constant analysis of the top-ranking themes of interest that have been recently increasing in demand. Cryptocurrency or Bitcoin is one of such main topics of interest not only for international and global companies but also for individuals. Hence the company should probably concentrate on this trend that relates to bank services and is quite innovative in its implementation. Although cryptocurrency is rather unpredictable, it is worth trying to invest in this sphere; however, constant monitoring of the situation in the market is required. Diverse predictions are made about such an unphysical currency, for example, one of the most theories is that cryptocurrency might disappear at any moment due to the inability of its utilization in purchasing processes. Hence, it might be the last opportunity for Henderson & Company to partake in this type of investment.
In addition to the previously suggested types of investment, the purchase of bonds and securities that represent a type of low-risk investment is recommended. The company can invest in diverse types of securities that include equity, debt, and derivative securities. Each of them has its own benefits and advantages, as well as is associated with certain risk levels. Hence, it is highly advised to try investing in all kinds of securities to find out the most efficient ways of gaining additional income from investment for Henderson and Co.
Equity security generally represents partial ownership of a business in the form of shareholding. Therefore, the rights in regulating the companies’ functioning and policies are limited and provide access only to a restricted amount of benefit. Debt securities mean a borrowed amount of money or a loan that the company gets from outside organizations and is required to repay later. In comparison with equity, bonds do not include any voting rights; therefore, this type of investment encloses companies from outside impact. Derivative securities are the most secure and riskless investments as their value usually depends on such criteria as stocks, interest rates, produced and sold goods, currencies, and bonds. Derivatives can also be divided into four main types that include futures, forwards, options, and swaps. Henderson and Company are recommended to use forwards as this type of derivatives seems to be the most relevant option for now.
References
Milano, G., & Chew, M. (2020). Managing shareholder value through Covid-19 – and beyond. Treasury & Risk. Web.
Wild, J. J., & Shaw, K. W. (2020). Principles of financial accounting. McGraw Hill LLC.