Securing Deposit Against Falling Prices

If the stock markets perform surprisingly well even in times of crisis, this is not least due to the injection of funds by the central banks.

But in artificially busy markets a handful of bad news is enough and already the values ​​plummet.

And finally, every crash is a nightmare for the investor.

Secure Deposit: There are funds against falling prices

However, sleepless nights can be avoided with the right tools.

There are a number of ways to secure the deposit and also to take advantage of falling prices.

With some products, one can make a virtue out of necessity and enjoy profits when others lose.

But since every commitment involves both costs and risks, every investor should first consider whether this fits in with his or her investment and investment goals.

If you rely on different asset classes over the long term and with a broad base, you can save yourself the trouble and simply let time work for you. Over longer horizons, short-term losses are barely noticeable.

The situation is different when an investor mainly calculates with stocks and shorter time periods. In this case, there are a few possibilities of depot security:

Deposit protection with stop-loss limits

In the case of stop-loss limits, the bank is expected to sell shares that fall below a predetermined price. The lower limit should be at least 10%. Attention: The more volatile the stock, the lower the stop price must be set.

For popular stocks, this is also easy. More difficult, however, are market values ​​that are hardly noticed and are often extremely volatile.

With stop courses it is also to be noted that not infrequently shrewd fellow players are at work, which press the courses under certain brands, and then to tap off the low-selling shares.

Deposit insurance with warrants

Put warrants are put options. Thus, the investor relies on falling prices. However, this instrument to secure deposits is neither simple nor cheap. Among other things, art is about defining the right relationship.

So you want to compensate for all losses or you accept a certain percentage of negative?

To calculate how much to invest in the hedge, the brokers provide their own tools.

Put warrants can hedge the deposit, but are not for inexperienced investors. They also have to prove that they are on time.

Deposit insurance with certificates

Discount certificates limit the risk. Depending on the certificate, the share price may fall by up to a certain percentage without the investor experiencing a loss. However, then the achievable return is capped.

Safe Certificates are warranty certificates with a fixed term. After that, simply a fixed amount or the stock will be paid, no matter how the prices went.

Reverse – Bonus Certificates secure against losses; but only if the underlying falls.

If, on the other hand, it exceeds a certain threshold, losses are realized. The hedging is similar to short products.

Leverage certificates are mini-futures that allow you to bet on falling prices. The higher the lever, the bigger the profit.

However, then the knock-out threshold is reached faster at which the certificate evaporates and the investor runs out of funds.

Securities hedge with short ETF

With short ETFs – Exchange Traded Funds – investors benefit from falling prices.

They provide an index and, compared to certificates, have the advantage that they are protected as special assets against issuer bankruptcies. For short ETFs, there are no thresholds beyond which they expire.

Short ETFs are not futures and therefore less risky. In addition, there are neither present value nor total losses. However, less savvy investors should be careful with them.

Advantage: They are extremely cheap. However, this is also necessary because an investor must invest relatively much if he wants to compensate for all losses.

Securing Deposits: Use and Success

Who wants to secure his deposit, which should be aware beforehand that all options cost money.

It is therefore important to balance the relation between commitment and expected protection against price losses. Fully comprehensive insurance is more expensive than a partial comprehensive insurance.