Three affordable ways to invest in equities
Investors are often looking for affordable ways to invest in equities. Drop-back certificates and private equity funds are good options for this. They provide a comprehensive investment solution through prudent asset management.
Should I? Or shouldn’t I? This is the classic dilemma facing yield-seeking investors that even legendary experts such as Warren Buffett cannot escape. Should I invest now, or wait?
This thought loop, which children sometimes act out by plucking petals from a daisy, represents a timeless conflict for every investor. Investors are just as likely to get cold feet today as in the past. Because what is clear to the head doesn’t always sit well with the heart.
The three affordable investment options below are meant to make this type of decision easier.
Drop-back certificates: the smart and affordable way to invest in equities
A new structured product, called a drop-back certificate, now provides an intelligent way to invest. Of course, thanks to technology, it can be tailored to individual needs.
A drop-back certificate profits from the current low level of volatility and in some respects allows investors to “have their cake and eat it too”. In addition, it immediately allows investors to participate in the target market; in this case, in Swiss francs, 55% of the investment amount in the Swiss Market Index SMI. At the same time, it pays an interest rate that is well above the average (currently 3.25% p.a. in CHF) on the remaining portion, in this case 45%, of the investment amount, until the index falls through certain downside trigger levels. If these trigger barriers are triggered (in this case at 90%, 85% and 80% of the initial index level), the remaining investment amount will be invested in the underlying in equal portions at these lower index levels.
In other words, investors can a) optimize their market entry strategy and b) significantly increase their cash yields.
Private equity funds: the affordable way to invest in equities over the long term
The second way to systematically earn additional equity risk premiums can be found, today more than ever, in diversified investments in unlisted stocks – private equity funds.
When private equity funds are professionally selected and structured, they offer a significantly higher annual risk premium than liquid shares. Historical studies show that premiums on funds in the first and second quartile vary from 2% to 4% annually above liquid equity indices – a considerable added value when it accumulates over the years.
But be aware: private equity investments require a system. Successful private equity investors diversify not only across markets and investment styles, but also over years. Those who embrace this principle will have the most satisfaction in the long run from the cycle of recurring liquidation proceeds.
The best approach to holistic investing...
...is a diversified asset management mandate that is tailored to one's personal risk profile and investment objectives. Good, multi-dimensional diversification is the most undervalued secret of successful investors.
Competent asset management takes a steady hand, focus, attention to detail and prudence. It has nothing to do with the frantic search for a new idea every day. This makes the difference between speculating and investing. On the one hand, the latter is based on a robust investment process and continuous portfolio monitoring for systematic and special risks. On the other, an investment is based on opportunistic leveraging of genuine market distortions and global co-investment opportunities with some of the world's most successful asset managers.
In brief: those who are seeking holistic investment solutions can stop reading here. Because prudent and proactive asset management is the way to go.