Hong Kong, Hong Kong S.A.R., August 23, 2015 --(PR.com
)-- According to Meridian Capital Management’s Global Portfolio Study 2015, financial advisors and investors can now make the most of stock market corrections by embracing volatility and investing in mutual funds and exchange traded funds that capitalize on the movements of the market. These products are designed to gain the opportunities that are presented by the ever changing nature of the global market and aim at maximising profitable returns for the investors by identifying new sources of revenue and adapting to new tax policies.
Steven Woodall, Head of Global Portfolio Construction and Risk at the firm, says, “Recent market trends may have ignited investor concerns but embracing the volatility in these market conditions will eventually help in strengthening an investment portfolio.” While stressing on protecting the interests of the investors, he further explains, “Our recent survey shows that allocating a small portion of an investment portfolio to volatility funds will hedge downside risks for equity investments as well as other asset classes.”
On being asked about the actual ways in which volatility funds will help, he said that investors and financial advisors should look at these funds as insurance policies for client portfolios. They quickly offset potential losses from other investments and thus create an additional layer of protection. Moreover the returns that they generate during market selloffs can be reinvested in promising assets that generally lose value while the investor rushes to divest.
The correlation between equities and volatility usually decreases during market fluctuations and this can prove to be advantageous, according to Meridian’s reports, because unlike potential hedges, volatility exposure can provide equity investors with much-needed protection in an ever-changing market scenario.
Sebastian Malbry, Senior Market Analyst who has been with the firm from its inception, stressed on the following points while discussing these alternative resources:
· Strategies of exposure
· Term of Exposure
He recommends that investors and advisors should look for portfolio managers that seek to identify and capture long-term volatility exposure. According to Sebastian and the firm’s reports, managers who keep a track of the relative value of VIX-traded futures and options contracts on a regular basis have a much better scope of identifying the most reliable investment opportunities over short, medium and long term exposures. Secondly, shorting overpriced securities can also create efficient exposure to volatility.
Adding to the recommendations, he says, “Markets cannot be expected to remain stagnant; with unpredictable market trends and innumerable strategies coming up in each financial year, it becomes mandatory for advisors to select the most cost-efficient insurance policy that offers maximum coverage.”
Volatility exposure costs money and is quite similar to an insurance policy but this is one of the most effective ways of securing portfolios during the different parts of a market cycle. Mr. Woodall further opined in the report that this approach of portfolio protection is vastly different from the Modern Portfolio Theory approach of using bonds to offset stocks during times of sudden market changes but is definitely proving to be more effective in recent times.
Meridian Capital Management is a Hong Kong based investment brokerage firm that helps investors to achieve their investment goals through strategic trading, competitive returns and tailored solutions.