Participating in the day-to-day operations of a blockchain network may help you get a higher return on your investment, but it can be risky. Here’s what you need to know.

The trade-off between risk and reward is an essential concept in finance. When it comes to passive income, a greater potential return typically means a higher degree of danger when compared to comparable alternatives. Given this relationship, investors should not only choose which cryptocurrencies to stake based on the stated annual percentage yield (APY). A higher staking yield almost certainly implies that there are several elements contributing to a higher level of risk. Here are two main factors to consider.

1. Crypto market risk

The first and most apparent danger with cryptocurrencies, like any investment asset, is market risk. Every market is susceptible to volatility, and individual assets and securities are far more so. Expect short-term price fluctuations to vary greatly since any asset’s value is just a reflection of what investors are ready to offer or buy it for at a specific moment in time.

The cryptocurrency market, which is barely over a decade old, is highly volatile. The cryptocurrency industry has been extremely volatile since Bitcoin started the party in 2009. In 2022, for example, Ethereum’s price fell nearly 70%. Over the first half of the year, Ethereum has seen a drop of nearly 70%.

Staking is an excellent strategy to improve your investment returns, but a cryptocurrency’s price fluctuations can exceed the yield and result in a loss.

2. Liquidity and lockup period risk

The unpredictability of the cryptocurrency market adds to the second category of risk: liquidity.

A commodity is “liquid” if it may be readily purchased or sold. Cryptocurrencies are some of the most liquid assets on the market, since crypto exchanges are open 24 hours a day, seven days a week, 365 days a year. However, staking your tokens reduces liquidity somewhat.

It’s never a good idea to try to sell your cryptocurrencies all at once. Staking presents several advantages, such as tax breaks and the potential for higher returns on investment, in addition to reducing volatility. You should carefully consider whether it’s worth risking your money for any given cryptocurrency because some cryptos have lockup periods. If you want to stake Ethereum during its proof-of-stake transition, for example, you’ll need to agree to a one-year or two-year lockup period if you invest. If you need the cash within a specific period of time, avoid cryptocurrencies with a lockup period. Keep in mind that if market risk arises and the value of your holdings drops, you may be unable to sell tokens until the lockup expires.

Another thing to keep in mind is the liquidity of newer or smaller crypto projects. A new network might have a high yield to pique people’s interest, but lack of investor interest may make it hard to sell or convert your rewards into other more popular cryptocurrencies like Bitcoin or Ethereum. Before purchasing and staking a new or small cryptocurrency, look at how much trading volume it has.

Stocks are having a particularly difficult time in 2022 owing to a variety of factors, including elevated inflation, the prospect of a recession in the United States, and a worldwide economic downturn. The S&P 500 fell 18% thus far this year as a result of these headwinds. However, now may be an excellent moment for investors to acquire some outstanding businesses at reduced prices, especially given that a bull market could return within the next few months.

The end of the bear market is estimated by Bank of America to come in October 2022. When the bear market concludes, stocks are likely to embark on a multiyear bull run, according to historical patterns. If that’s the case, investors may wish to consider buying Nutanix (NTNX 0.90%) and Lam Research (LRCX -0.21%), which are not only cheap right now, but also have excellent prospects that could supercharge their stock prices in a bull market. Let’s look at why.

1. Nutanix

Despite its rapid expansion, Nutanix stock tumbled by 52% in 2022, according to market observers. Given the company’s outstanding rate of development, it may come as a surprise that its revenue increased 17 percent year over year in Q3 of fiscal 2022 (which ended on April 30, 2022). Last quarter’s adjusted loss was $0.05 per share, compared with $0.41 per share in the year-ago period.

There is a considerable demand for Nutanix’s business solutions, which help clients in migrating to a hybrid cloud model that mixes public and private cloud resources.

According to Mordor Intelligence, the hybrid cloud market may expand at a compound annual growth rate of 21% through 2026. Nutanix is in an excellent position to capitalize on this sustained incremental growth, as it is the second-largest player in the market with a share of almost 25 percent. Furthermore, examining Nutanix’s customer base and billing growth reveals that any slowdown will most likely be brief.

Customer counts and spending at Nutanix increased in the recent quarter. Last quarter, the firm’s customer base rose 13% year over year to almost 22,000 individuals. Furthermore, client spending grew considerably. That was reflected by the fact that last quarter 1,747 consumers made more than $1 million in lifetime bookings, up 22% compared to a year ago. By 2025, according to Nutanix’s projections, its addressable revenue potential in hybrid cloud and adjacent markets could be worth $61 billion as opposed to $39 billion this year.

Throw the company’s strong market position into the equation, and it is easy to see why the company should continue to enjoy a good balance of client expansion and increased spending. Finally, now may be a good time to buy this cloud specialist before it goes on a bull run, with its stock trading at just 2.1 times sales as compared to its five-year average sales multiple of 4.95.

2. Lam Research

Lam Research, which specializes in computer processors for notebook computers, has also suffered a significant loss of value this year, dropping 37%. As a result, Lam is presently priced at 14 times trailing earnings, versus the S&P 500’s multiple of 20.4.

Lam’s stock is an enticing buy right now because the firm will play a key role in resolving a major issue: the worldwide chip shortage. The company manufactures, refurbishes, and services integrated circuit manufacturing equipment that is used to fabricate microchips. Not surprisingly, Lam’s revenue and earnings have risen considerably over the last few years as semiconductor demand has grown significantly, boosting demand for manufacturing tools.

Samsung, Micron Technology, SK Hynix, and Taiwan Semiconductor Manufacturing (commonly referred to as TSMC) are among Lam’s clients. These chipmakers are preparing for significant financial investments in the years ahead. Micron has announced that it will invest $150 billion in manufacturing and research and development by year 2030, while TSMC has increased its spending expectations significantly.

The healthy end-market potential explains why Lam’s earnings are anticipated to grow at a double-digit rate for the next five years, with an average annual growth of nearly 14% during that time. 2022 revenue is expected to climb 15% to $16.8 billion, followed by a 16% surge in 2023.

All of this indicates that investors should not pass up the opportunity to buy Lam Research because it has a potentially strong end-market potential.

You can begin receiving Social Security payments when you reach the age of 62, but retirees are commonly urged to wait to claim them since claiming benefits early lowers monthly income.

A retiree’s basic benefit is based on their work history, but it is only paid if they begin payments at age 65 or later. Payments will be lower initially, but more checks will be issued over time if a claim is filed before that date. A claim made after that date would result in the opposite; retirees would receive fewer payouts now, but greater ones in the long run.

If you postpone a claim, you’ll be giving up money that may be received right now in exchange for larger payments in the future. That’s why it’s so vital to do the math and determine how many of the higher payments you will need to come your way in order to make up for the income lost. In many situations, you’ll discover that it really does take a surprisingly long time for the future larger checks to compensate for all of the money you missed out on.

In 2022, the typical Social Security payment is $1,661. If you claim your retirement benefit at 62 rather than age 67 (the FRA), you will reduce your check by 30%. As a result, if you claim at age 62 instead of FRA, the average benefit will drop to around $1,163 per month. If claimed at age 70 rather than 67, the $1,661 average allowance would rise to around $2,060 per month.

Obviously, monthly payments of $2,060 appear to be more attractive. However, there is a significant exception. You will have missed out on eight years of regular payments. Passing up 96 $1,163 cheques means forfeiting $111,648 over eight years. Since you would eventually receive an additional $897 each month at age 70 after passing up the checks for 96 months, you’ll need around 124.5 monthly Social Security benefits in order for the additional $897 each month to make up for the lost amount of money.

This calculation is based on the assumption that you were on track for roughly average benefits and took payments at 70 rather than 62 years. You’d have to survive until at least 81 years old in order to break even.

Does it make sense for you to wait to claim your benefits?

If you believe you will live long enough to receive enough additional revenue to make up for all of the income you lost by putting off claiming Social Security, it makes sense to wait as long as possible to start. However, if your health is in question, a delayed claim may result in less lifetime earnings. So you would be better off beginning benefits sooner rather than later, even if it means receiving smaller payments each month.

Although the fall in cryptocurrency values may tempt you to “buy the dip” on some tokens if you have some spare cash, because it lacks any fundamental principles, valuing cryptocurrencies is much more difficult. Because cryptocurrencies do not generate any underlying free cash flow, they are inherently uninvestable for long-term value investors. You’re undoubtedly better off keeping your portfolio invested in equities if you care about such matters.

These are two internet businesses with greater potential than any bitcoin.

1. Spotify

Spotify is the first on our list (SPOT -1.71%), a global leader in music streaming. The firm started as a music streaming service over 10 years ago, but it has since expanded to include additional audio codecs such as live audio, podcast and (yet-to-arrive) audiobooks.

Spotify earns revenue by selling subscriptions that provide ad-free and downloadable music listening, as well as advertising for its podcast catalog and free listeners. It had 182 million premium customers and 252 million ad-supported users throughout the world at the end of Q1. This resulted in $11.8 billion in income and $3.15 billion in gross profit over the last year. Spotify’s gross margins are currently around 25%, but the company is investing heavily in expansion with its podcast efforts, which explains why they’re so low right now. The firm expects to improve gross margins to 30 percent or more over the next several years, allowing it to begin generating significant cash flow for investors.

2. Match Group

Match Group is the second-largest firm on our ranking (MTCH -0.67%). Match is the most well-known and popular online dating network, with Tinder, Match.com, Hinge, and other top brands. With its various apps now being the most common method for people to connect with potential lovers online, the business has been benefiting from a long-term tailwind in online dating.

Dating apps are incredibly asset-light, allowing the firm to achieve huge profit margins while also investing in development. Match’s revenue expanded at a compound annual growth rate of 22% from 2017 to 2021, with operating margins above 35% each year during that period. This indicates that when this decade is more developed, the business will be able to enhance its margins even further

A stock split allows publicly listed firms to change their share prices and outstanding count without affecting their market caps or performance. A forward stock split lowers the price of a firm, making it more accessible to retail investors who may not be able to access fractional-share investment opportunities.

More importantly, stock splits are seen as a sign of strength. Consider it this way: If a firm’s share price wasn’t high enough to consider a split because it wasn’t delivering on its business plan and/or out-innovating its competition, then what sense does that make?

This is an excellent time to buy stock splits, because several well-known firms have announced or implemented them thus far in 2018. But a tiny group of these stocks outperforms the market by a long shot. Here are two split-stock stocks that you can buy right now and keep for the rest of your life.

Alphabet

The first stock-split stock that’s a good buy-and-hold investment is Alphabet (GOOGL -0.27%) (GOOG -0.28%), the parent of Google and YouTube.

In Feb., Alphabet announced that it will undertake a 20-for-1 forward stock split, which was subsequently approved by shareholders. When implemented in mid-July, the split will reduce Alphabet’s share price to approximately $118 compared to its recent high of $2,360 (for Class A shares, GOOGL). As a result, Alphabet’s outstanding share count will be multiplied by twenty.

The company’s search-engine business is one of the reasons Alphabet has been so popular to keep on your watch list. Google has basically become a monopoly during the previous two decades. According to GlobalStats statistics, Google has controlled between 91% and 93 percent of worldwide internet search in the trailing 24 months. Advertisers know that promoting with Google is their greatest chance of getting their message in front of consumers, which is why they are willing to pay such high prices for it. As a result of its near-monopoly status in internet search, Alphabet understands it possesses significant pricing power.

Alphabet’s cloud infrastructure services division is perhaps even more fascinating. Google Cloud is the world’s third-largest cloud service company and has seen revenue rise by 40% to 50% on an annual basis. Cloud infrastructure may be in its early phases, thus providing a long runway for parent Alphabet to increase operating cash flow.

Alphabet shouldn’t have any trouble paying patient investors since it has no shortage of competitive advantages.

DexCom

Continuous glucose monitoring (CGM) system maker DexCom could be a second stock to add to their portfolios without the intention of selling.

In March, the board of directors at DexCom decided to approve a 4-for-1 stock split, which was later given the go-ahead by shareholders during the firm’s 2022 annual stockholders meeting in May. On June 10, this forward split came into effect, with shares of DexCom trading below $78 last week. For comparison, shares were changing hands at a pre-split peak of $659 in November.

The beauty of healthcare companies is that they’re extremely defensive. People will always need prescription drugs, medical devices, and healthcare services, no matter how well or poorly the economy and stock market perform. It does not imply that individuals cease to be sick just because Wall Street or the US economy runs into a problem. This provides a degree of demand stability that few other sectors and industries can compare to.

For years, DexCom has been the world’s No. 1 or No. 2 CGM maker. Despite the fact that the DexCom G7 CGM System will continue to drive double-digit organic sales growth for many years to come, previous versions have preceded it. In other words, continuous improvement is what allowsDexCom to maintain a dominant market position.

Furthermore, DexCom is designed as a high-margin razor-and-blades company. Diabetic patients buy the hardware (the “razor”) they’ll use to read their blood sugar levels and replacement sensors (the “blades”) that monitor and transmit blood sugar levels to hardware devices. It’s ideal for generating operating margin over time.

The Federal Reserve just completed the results of its yearly stress testing, which subjected the country’s biggest banks to a variety of severe economic scenarios comparable to a deep recession.

The objective is to ensure that the banking sector is stable. This year, the Federal Reserve was not playing around. Between Q4 of 2021 and Q1 of 2024, the Fed’s theoretical scenario included unemployment increasing to 10% or more, commercial real estate prices declining by 40%, and stock values dropping by 55%.

All of the banks were put to the test, and all passed. The Fed determined that Bank of America (BAC -0.28%), the second-biggest bank in the United States, would have a pre-tax loss of around $44 billion during the nine-quarter time period in this hypothetical scenario, far exceeding any of the 33 banks that were tested. Should this worry investors?

Understanding this scenario

The Federal Reserve is essentially using assumptions about the economy in this hypothetical scenario, together with a slew of other assumptions, to figure out how a bank would operate under stress. One thing to bear in mind is that the Fed is employing a variety of assumptions in these theoretical situations that I am sure bank executives would not agree with. Furthermore, this is speculative. The unemployment rate presently stands at 3.6 percent, and no one expects it to rise above 10% anytime soon.

However, the Fed does this for a different purpose. The Great Recession caught everyone off guard, so this test is used to ensure that banks are adequately prepared and capitalized to face a severe recession.

In the Fed’s model, Bank of America will produce more than $28 billion in pre-provision net income during this nine-quarter period. The bank, on the other hand, would suffer from having to set aside over $53 billion for possible loan losses over the course of the nine quarters, which detracts from earnings.

The Fed believes that the loan losses would amount to $52.5 billion during the stressed period, with more than $13 billion in credit card loans and over $8 billion in commercial real estate.

I was expecting industrial and commercial loans, which are issued to businesses for things such as capital expenditures and working capital, to take a significant hit from the Fed’s projections that Bank of America would suffer more than $17 billion in C&I book losses.

Another consideration is that Bank of America’s credit card portfolio has a 16% loss rate in the Fed’s scenario. Given that credit card loan losses reached nearly 11% during the Great Depression, this looks rather severe.

Close to $13 billion of counterparty and trading losses are estimated during the time, which stems from BOA’s investment banking division as well as holding financial instruments like derivatives.

In terms of money, the Fed considers how a bank’s common equity tier 1 capital ratio would change under these circumstances. The core capital ratio is a metric that banks and regulators watch closely. It is the proportion of risk-weighted assets, like loans, included in a bank’s regulatory capital ratio.

Each, the Fed establishes minimum CET1 ratios for banks to comply with, and these are based in part on this stress testing. CET1 capital is employed to absorb any unexpected loan losses. The Fed discovered that Bank of America’s CET1 ratio would begin the stressed period at 10.6 percent and decrease to 7.6 percent during the test, which is above the 4.5 % CET1 requirement that all banks must meet.

It’s been a difficult year on Wall Street. Since the 126-year-old Dow Jones, widely followed S&P 500, and Nasdaq Composite hit record highs, they have dropped 19%, 24%, and 34%. The S&P 500 and Nasdaq entered a bear market for the first time since March 2020 following the latter two plunges.

Bear markets, on the other hand, have a propensity to feed on investors’ concerns. Market downturns are often brief. Furthermore, every time the major US stock indexes have fallen by at least 20% over multiple days, it has been an excellent buying opportunity for patient investors.

To put it another way, it’s not a question of whether you should buy equities right now; the issue is what stocks to invest in.

Two Dividend Aristocrats in this little group of passive-income juggernauts have the potential to make long-term investors a lot wealthier. If you give these two income titans until 2032, they’ll have the creativity and intangibles needed to turn a $300,000 investment into $1 million by then.

NextEra Energy: 2.17% yield

The largest electric utility stock in the United States by market capitalization, NextEra Energy (NEE -0.17%), is one of the first Dividend Aristocrat stocks capable of returning 233% in 2032. Over the last 26 years, NextEra has raised its base annual payout.

Utility stocks have a leg up on other types of equities since they provide extremely consistent operating cash flow. Electricity demand is fairly constant from one year to the next. NextEra can put money down for acquisitions, dividends, and new infrastructure projects without jeopardizing its profitability because electric demand does not fluctuate much from year to year.

NextEra Energy’s unique selling proposition is its renewable energy strategy. No other electric utility is producing more capacity from solar and wind power. With the firm committing to spend up to $55 billion, in aggregate, from 2020 to 2022 on new infrastructure projects, it is doubtful any other utility will surpass NextEra in terms of green energy anytime soon.

Clean-energy initiatives are not only expensive in one sense, but they have also proved to be well worth it. Aside from taking advantage of historically low lending rates when funding projects, NextEra has seen a large drop in electricity generation costs as a result of its aggressive green energy investments.

NextEra Energy’s second-quarter earnings are boosted by its regulated utility operations (those that are not fueled by renewable energy sources). NextEra won’t be exposed to the volatile wholesale electricity pricing since state public utility commissions regulate rate levels.

Walgreens Boots Alliance: 4.72% yield

A second Dividend Aristocrat that could turn a $300,000 investment into $1 million in ten years is Walgreens Boots Alliance pharmacy. For over 89 years, Walgreens has paid quarterly dividends and increased its base annual payout for the last 46.

Healthcare companies are consistently immune to stock market fluctuations and economic downturns. Individuals will always get sick and need medical devices, prescription drugs, and healthcare services, no matter how bad the economy or stock market gets. COVID-19, on the other hand, introduced a new situation for traditionally foot traffic-driven US pharmacy chains that resulted in an actual profit reduction. This short-term downturn provides an excellent opportunity for long-term investors to buy in cheap.

When the pandemic hit, the Walgreens Boots Alliance’s leadership team implemented a multipoint plan to increase organic growth, improve operating margins, and encourage repeat visits.

Walgreens reduced its annual operating expenses by more than $2 billion a year ahead of the set schedule, according to reports. It has, though, poured money into numerous digital transformation efforts. For example, increasing direct-to-consumer sales is a smart approach for Walgreens to boost organic growth and enhance customer convenience.

This development, however, is its collaboration with and investment in VillageMD. The two businesses have already established over 100 co-located, clinics that are full-service with the aim of reaching 1,000 by 2027. Whereas most pharmacies can only give vaccines, these doctor-staffed clinics are ideal for gaining repeat patients and directing them to Walgreens’ pharmacy.