“High risk does not generate high returns, rather Smart calculation can generate high returns.”
Have you ever wondered why only some investors are successful in the stock market? And Can Equity be a safe investment option?
Yes. It can! We at Finideas believe that generating returns from Equity is a simple but smart game. We just need to understand the power of derivatives.
Derivatives are financial contracts; they have been used as protection/Insurance since 1875. Futures and Options are most prevalent in India. Derivatives are just like having an insurance policy whenever you face any losses. It is a complex type of financial security that we will understand in this article.
Equity Vs Equity Index
The Nifty Index is the average of the top 50 company’s market capitalization. In the market’s worst-case scenario, the weak companies go out of the list of 50 companies, and the stronger ones take their place. So we can say that an index can never become zero, and just like properties, sooner or later, we expect our investments to grow with their value. Let’s see how it’s different from equities?
Equity refers to the shares issued by individual companies. These can be purchased in the stock exchanges by individuals, firms, corporate investors etc., you will have to be very careful while choosing equities. You must look deep into various factors like their quality of the management, past performance, etc., which is not required in the index. An index is a combination of the top 50 stocks of the country.
Equity + Safety = Prosperity
When it comes to the matter of indexes, our focus should always be on the protection of our portfolio so that we feel protected even when the market falls regardless of earning maximum returns every time
And that’s how you will grow in the long run by protecting your portfolios, Right?
In Index Strategy, all you aim is to invest your money in index with the proper protection against the market fall and gain maximum returns. All you can do is invest your money in Index ETFs with Index Futures. You can purchase protection, i.e. Put Option on the investment called hedging; you can Invest rest money in Debt Funds and generate fixed returns to cover the cost of hedging. So downside you will have limited risk and upside you can generate same returns like Equity, and that’s how you can achieve Prosperity.
We aim to beat inflation with no stress work and just growth for the desired investment plan. We try to work on the formula which works with less investment and proper growth, which could be paid later; you can enjoy your prosperous retirement with no worries and feel financially free in your entire life. It should secure your capital if the market falls and give us good returns while the market rises. And this index-based strategy is the combination of equities, debt, and futures with safety, so the strategy has a low-risk appetite. So it’s a win-win situation every time !!
Index Long Term Vs other Investment Plans
If we compare it from the other standard products, trades should be made in your account, and there should be no entry and exit load, you should receive the full benefit of leverage, there should be no lock-in and lock-out period, and you should have all the details of your transactions
The main and the best advantage of the product Index long-term strategy is that you can get systematic withdrawal plans and other payment schemes.
Importance of Hedging
Derivatives can be used to hedge positions; common derivatives include futures contracts, forwards, options, and swaps. And Options can become an excellent hedging tool while investing. Trading with options can give you exciting opportunities to profit from the stock markets under any condition. Whether the markets go up, down or trade in a range-bound way, you can use one or more options to create a strategy for making a decent profit from the markets. If you are risk-averse, then trading with options can also enable you to keep your losses limited to the premium you pay.
Power of Artificial Intelligence / Algorithms
If we list down the benefits of the algorithms, we can say that it will ensure us three qualities that regular manual trading would not be able to offer, i.e. speed, consistency and accuracy altogether
(A) Speed:
Since the computer can process the data much faster than any human mind, the analysis and trading in the case of Algorithmic Trading happen much faster than in manual trading.
(B) Accuracy:
Human minds are prone to making errors in calculation and execution. However, the machines rarely make any errors. That is why the trading and advisories through Algorithms are highly accurate and recommended.
(C) Consistency:
You may sometimes feel fatigued while doing screen reading for a long time, but machines never get tired. It will look for trading opportunities and execute them for you consistently without stopping even for a moment.
Finideas is a SEBI approved Investment advisor. We provide Advisory after having your risk profiling and KYC done. We recommend you what to trade from time to time as per your Investment profile.
And we are among one of the fastest-growing economies, and this growth can provide us good opportunities to achieve financial freedom. Things have also become very easy now. We just need to click the button to learn, to understand and finally to take action.
Happy investing !!!
