portfolio diversification using financial derivatives

Portfolio Diversification using Financial Derivatives

Presented by: Amro AbduMiddle East Head of Sales

- A financial management technique that aims to minimize the effect of a single poorly performing investment

in the portfolio by spreading out the risk among a balanced mixture of investments.

What is Portfolio Diversification

Why Diversify

• “Don’t put all your eggs in one basket”

• Limit impact of poorly performing investment

• Increase exposure to multiple markets

Guideline to diversification

• What are my investment goals? • What is my time frame to reach these

goals? • Can I afford to invest regularly? • What growth rate do I need to reach my

goals? • What is my risk tolerance to reach my

investment goals

Types of Diversification

• Horizontal Diversification• Vertical Diversification

Instruments of diversification

• Commodities • Stocks and stock indices• Forex

What are CFDs?

A Contract For Difference is exactly that, it is a contract with an entity (broker) to exchange the difference between the opening value and the closing value of an instrument, whether that instrument is an individual equity, a bond, a future, option and so on.

commodities

• Agriculture• Energy• Metals

Agriculture CFDs

• Softs• London Coffee

London SugarLondon CocoaOrange Juice US CocoaUS Cotton No. 2US Sugar 11US Coffee "C"

Soft Commodity Fundamentals

• Beginning Stock• Production• Imports• Total Supply• Demand (local Demand and Overseas)• Ending Carry over stocks

Energy CFDs

• Oils• NYMEX WTI crude oil

Brent crude oil

Major Energy Fundamentals

• Weather• Seasonality• API and DOE report (supply/demand)• Geopolitics• Opec

Metals CFDs

• Metals• Gold

SilverCopperPlatinumPalladium

Metal Fundamentals

• Gold: Central banks, Geopolitics, China and India, Inflation and Interest Rates

• Silver: Copper, Zinc, and lead production, photography market, India

• Platinum: Japan, automotive industry and the environment.

• Copper: Industry and construction, geopolitics

Stocks CFDs• United

States• WallStreet

30US SPX 500US Tech 100

• Europe• Netherlands

All-ShareAustria 24Belgium 20Germany 160UK 350

• Spain 35

Italy 40France 250Switzerland 28

• Australia• Australia

500

Indices• Europe• UK 100

Netherlands 25Finland 25 Norway 25 Denmark 20 Hungary 14France 40Germany 30Germany Mid-Cap 50 EU Stocks 50Spain 35Poland 20Italy 40Switzerland 25NEW! Sweden 30

NEW! Austria 20

• North America• WallStreet 30

US SPX 500US Tech 100US Small-Cap 2000NEW! Mexico 35NEW! Canada 60

• Australia• Australia 200

• Asia

• Hong Kong 40Japan 225NEW! India 50NEW! China H-SharesNEW! Singapore Blue ChipNEW! Korea 200

• Africa• NEW!South Africa 40

Equity Fundamentals

• General Economic Activity• Interest rates• Inflationary Expectations• Political Consideration• Investor Attitudes• Innovation

Forex

• 3.4 Trillion a day in volume• Leverage of up to 400:1• Low minimum capital requirements• 24 hours 5.5 days of trading• Transparency

Forex Fundamentals

• Trade Balance• Wealth• Deficit/surplus• Interest Rates• Geopolitics

Conclusion

• “Do not put all your eggs in one basket”

Questions