How market volatility can make you rich
What is volatility? Volatility is an investing term that describes when a market or security experiences periods of unpredictable, and sometimes sharp, price movements. People often think about volatility only when prices fall, however volatility can also refer to sudden price rises too.
Generally speaking, average investors associate market volatility with uncertainty and in a negative perspective. However, it is volatile markets that generate the best returns. This is so because during volatile markets an investing strategy designed to benefit from both market fall and market rise can yield exceptional returns in a very short period of time.
A case in point is how our investing strategy PrudentGain aims to exploit market volatility to generate extra portfolio income. Best example of our strategy in action came in the wake of shock to financial markets worldwide caused by outbreak of Ukraine war. Leading market indices in India tanked around 5 to 6 percent overnight in line with most world markets in reaction to the war. A hedged position on Nifty 50 index of 0.50% of portfolio value generated an astonishing 10% of portfolio value in returns. That is 20 times return in one day!!!
Same is the case when the markets rally rapidly in reaction to positive events. Since the cost of hedging is fixed in our strategy, any rapid market rally earns an attractive return for the investor after adjusting cost of hedging.
To know more about our investing strategy contact us today.