and how do I represent this with a small deposit volume?
The word portfolio is important! I don't want to start a discussion here about whether real estate, ships, vintage cars and Pokemon cards belong in this category.
I have had a few thoughts on the subject, which are admittedly based on evaluations of my own portfolio.
Many people who follow my posts here probably think I'm a gambler, although the pure short-term derivative trades are clearly in the minority. I consider my portfolio to be fairly well diversified and I base this on a very simple point.
There is almost never a day when all stocks are green or all stocks are red. Why does that speak for diversification? Well, how many days have there been where all MSCI World stocks, commodities such as gold, oil, Bitcoin, all sector indices etc. have risen? I haven't counted them, but there probably weren't many. This means to me that portfolios where all stocks are often green or red cannot be sufficiently diversified.
Is that a logical approach?
And now a few more thoughts on why I trade relatively heavily in derivatives. Of course, the main point is that I can't otherwise achieve my goal of turning €3,000 into €100,000 in a maximum of 10 years without making large deposits.
At the beginning, a good 2 years ago with €3,000, I didn't have the capital to invest broadly and diversified in shares. Now that my portfolio value has increased to €15,000 over the past two years, it looks better, but you still can't make big leaps with it. So I use the vehicle of derivatives to invest broadly, especially in growth stocks, so that I can still invest in these companies.
I use either long-dated OS with a remaining term of more than 12 months or turbo certificates that run indefinitely. In contrast to short-term trades, I then use lower leverage, as the focus is not necessarily on quick profits, but on medium to long-term participation in the company's growth and the associated price increases.
I also take advantage of the opportunity to change the OS when it approaches maturity. On the one hand, this gives me a potentially higher return than with the old certificate with the short remaining term and I can continue to participate in the positive performance of the share.
For example, if a share costs €500 and I would only buy 10 shares because I like the company and am convinced in the long term, this would tie up a third of my portfolio. With a subscription ratio of 10:1, I would get an appropriate OS for around €8. So if you leave out the premium and leverage, I get the same opportunity for €800 as I would for €5,000.
Of course, this only works for growth stocks and not if I am looking for dividends.
I would also like to show you a practical example.
For example, if I want to play the quantum technology theme in the long term, I consider $IBM (-1,22%) is a very interesting possibility. For me, this is an absolute top tech stock in the medium to long term. That's why I bought an OS back in April, but it only had 8 months to run, so I'll be switching soon.
The share was at around €200 at the time. The OS was at €0.85. So I only paid slightly more for this investment with my original purchase of 300 shares than if I had bought 1 share.
However, as the profit is not the main point of this article, but rather how I can invest in more expensive quality companies in a broadly diversified manner even with a smaller portfolio volume, I will leave it out now. If you are interested, you can work it out for yourself.
So I hope I haven't bored you too much with my thoughts and strategies on the subject of diversification. By the way, there is of course one more tip. Despite all the care taken when selecting these longer-term investments, derivatives are of course always riskier than investing directly in shares. You should of course bear this in mind.
And now I wish you a nice hot start to the weekend.
