Wednesday May 25, 2022

Stle hls strty markets – make money on it

A sharp decline in the financial markets and their volatility does not necessarily mean a turbulent investor. Klem is a suitable choice given strategy. This wild period can be hell, for example, in my usual form of investment. However, this investment will not be low.

Take advantage of a predatory situation or repent…
Undoubtedly, the main goal of a normal investor is to get a dog “without losing a bouquet” at the same time. So it should be used. A similar development takes place every 4-5 years.

The crucial step is to reduce the possibility of significant investment losses and maintain the potential for portfolio growth in the future, and the markets will turn into a significant plus again. Although the decline in the stock market can be easily compensated by shifting investments from risky stocks to safe bonds, this voucher can now be universally applied. At the same time, declines in stock markets are accompanied by steadily rising inflation. We can currently define three investment procedures.

  • Krtkodob speculative pstup
    It is an active use of the current volatile situation in the market for short-term trade with speculation on both growth and decline. Of course, in the first evaluation of the attitude to risk.
  • Long-term approach
    At the time of the downturn, the investor is buying those investments that have fallen sharply below their fundamental value, and the so-called “no”, where the investment price moves in the short term. With these strategies, the bag must closely monitor and know the market and have very strong nerves. His chosen strategy is to develop a completely different time. In the case of a long-term approach, the investor must be able to turn the market back and wait. And not only in du msc, but sometimes in years.
  • Appropriately can be combined both strategies – the help of a hedge fund

    If neither of the two changes is suitable for investors, offer to go – a combination of the previous two aid to invest in so-called special funds for qualified investors (hedge funds). Although this alternative is not well known to Czech investors, it is a generally popular form of investment. It is suitable for a long time practically “for every weather”.

The goal of these special funds is to pinch investors an interesting and positive return if one year and at the same time reduce the risks of sharp declines. In addition, the best of these funds are able to earn on both the growth and market decline. These funds are usually targeted at so-called qualified investors. From a property and professional point of view. Investments in these funds are at least in the amount of thousands of euros. The most common is between 50-100 thousand. eur. With their free investment approach and setting the minimum required investment, special funds are different from classic mutual funds.

These, on the other hand, are intended firmly for small investors and investors, even in many indices, and in the so-called long way – if the market can be done, make money. In all these declines, the market, however, most of them are not able to more significantly protect the investor from a decline in his investment. And we are witnessing this the first day.

Even a hedge fund must be selected
The best special funds show very good returns and at the same time resilience in a declining market. Even in their case, it is necessary to keep in mind that they are definitely not the “sacred blood”. The first thing for the hedge fund industry to pay more than anywhere else is that we find both long-term quality giants and high-risk supernovae, which in the short term are experiencing extreme returns, but with the decline of the market disappears from the scene.

How do I know the best one?
There are two main criteria, at the same time fulfilling the reliable separation of grain from chaff. It is the historical performance of a given fund along with its ability to accommodate even sharp market declines.

This means how the fund is able to control and eliminate the risk of a sharp and prolonged market downturn. The measure is the so-called draw-down effect, which indicates by what percentage the most accumulated in the past decreased the NAV (the same trade name, ie the difference between the total assets and liabilities of the fund) of the monitored special fund.

Quality funds have this percentage decline far less than the classic index of fund holdings and stock indices – see the comparison in the table and chart (column MAX do not look for a decline).

If both of the above conditions are met, such funds can be forced to invest and thus shift the worries and stress associated with daily investment decisions. What is especially important in times of very volatile market is a relatively well-known left and often a large financial gain.

A suitable fund will make long-term money and protect investments even in the event of a slump
Developments between 2005 and 2008 show how hedge fund deposits behaved over the past three years. This includes the period of the fall of the stock in the autumn of 2007 and in the spring of 2008. At that time, the most watched stock markets fell by 14 and 17 percent in 4 months.

For our comparison, we will also use an index containing such hedge funds, which have no limited restrictions on their investments, and can therefore react completely freely to the market situation (so-called Multistrategy Funds monitored by Bloomberg). This is an index mapping the performance of a 975 hedge fund and representing the average return of the pool.

Table: Compare 3-year input

The table and chart show that hedge funds have protected investments not only in the event of a change in the stock at the turn of the year, but also long-term investment in them turned out to be very interesting. Not only did the index of these funds “pull” the returns of the main stock markets, but it showed a roughly five-fold drop in value (-2.8% vs. -14% and -17%).

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