Category: Money tips Release Date: 2006-12-01
Warrants or options tend to give high-risk, high-return sense, investors might think that such a leveraged investment vehicle and conservative investors necessarily insulation. But I wonder whether investors took note of the current international market, the Capital Preservation Fund in Bulgaria, apart from this, in fact, also make full use of options to provide investors with appreciation potential?
The current international market, capital preservation fund, the general would 80-90% of the capital is placed in zero-coupon bonds, it is mainly to provide investors with capital guarantee and the remaining approximately 10% will be placed on options to secure the potential increases. As the warrants are also an option, so even a conservative investor will try to put adequate funds in the warrants, the rest were placed in low-risk as well as risk-free investment tools, such as certificates of deposit, currency fixed deposits and bonds for themselves to make a capital preservation fund.
For example, investors with 10 million dollars investment in the principal goal of investment period is approximately 4 years. To ensure that four years after the accounts were at least some of these 10 million, can make use of the discount method of calculation. Suppose investors select certificates of deposit or bond provided by the interest rate is 3.5%, using the discount calculations, investors need to put in about 87,144 yuan in certificates of deposit or bonds to ensure that the four years after the principal and interest be refunded a total of 100,000 yuan. After deducting the 87,144 yuan, in other words, investors are still 12,856 yuan for other investment purposes.
Discount calculation method:
Target amount / (1 + per annum) investment period = amount of investment is required to
Although the remaining funds are limited, but to provide leverage through the warrants of such a tool, investors can still strive for the ideal returns. Warrants on the market long-term and short-term, prices outside the inside and price points, so a different risk tolerance of investors have the opportunity to choose to go to the appropriate warrants.
Warrants advantage lies in its look up and put the function, investors that the portfolio if the market or individual stocks and some short-term performance may be weak, this will amount to buy put warrants to hedge the assets held by risk; also considers short-term performance of a stock or currency will be good, it may amount to buy the subscription card, through warrants leverage to enhance portfolio returns.
In general, we recommend investors to only about 10% of the portfolio of funds on the warrants, because warrants offer leverage, if put in too much money at the same time when the risk would be too much amplification; investors should be its risk-bearing capacity, control, invested in warrants on the funds, or to consult a professional financial adviser.
Flexibility in the allocation of funds, even conservative investors can blend in the portfolio of warrants.
