The Financial Times reported that the market fluctuations, which have been exacerbated by the economic policies of US President Donald Trump, have become anxious investors and opens the doors of new investment opportunities.
With the recent “VIX” index, the main question has become: How can investors benefit from these transformations without excessive risk?
Direct effect on the markets
The newspaper pointed out that Trump’s recent policies related to imposing customs definitions on China, Canada and Mexico have caused major disturbances in the global markets.
This move has caused investor concerns, as market fluctuations are seen as a sign of increased risk, but at the same time it is an opportunity for investors who are good at managing risk.
Investors strategies in the face of fluctuations
According to the newspaper’s report, there are different trends between investors to deal with fluctuations:
- Hedging through criticism and gold:
Some experts, such as Altaf Qassam, recommends the “Street Steette Investment Department”, to adopt traditional investments such as gold as a safe haven.
Also, retaining criticism can be useful to seize opportunities when the markets decline, especially with the high interest in the short term, which exceeds 4% in the US dollar and the British pound. - Use of derivative options (financial derivatives):
Experts like Max Grenakov from UPS believe that buying “Call Options” on the VIX index has become more common than buying “Put Options” on the Standard & Poor’s 500 index. This approach allows investors to hedge from risks and benefit from market fluctuations. - Innovative investments:
The newspaper pointed to the escalation of the popularity of investment funds with a specific return, as its managed assets grew by 53% last year to reach 60 billion dollars.
These funds provide partial protection from price breakdown with a specific ceiling for returns.
Following as an indicator of investment opportunities
The Financial Times adds that the fluctuations are not always negative, but may open the way for investors to benefit from it as an indicator of selective opportunities. An example of this is the new “DSBX” index, which measures the variation of returns between the components of the “Standard & Poor’s 500” index.
The rise in contrast indicates more opportunities to select shares selectively, and this provides a way to benefit from the increasing market fluctuations.
Challenges of investment in fluctuations
Despite the opportunities offered by the fluctuations, the newspaper warned of the risks associated with these strategies. And the use of derived options, such as the daily options that are expired quickly, may require accurate monitoring and quick decisions.
The investment in the fluctuation index funds has become less common due to the high costs and the decline in returns over time.
Hedge or risk?
The Financial Times indicated that there is a paradox in dealing with fluctuations: some see a threat that calls for hedging through safe origins such as gold, while others consider it an opportunity to achieve gains through innovative financial tools.
With the continued volatile policies during the Trump era, the primary challenge remains a balance between reducing risk and seizing opportunities.
