More Brazilians are joining this class of products that offer 'special' tax deduction conditions in times of Tax Reform (Image: iStock.com/MicroStockHub)
Prudence dictates that you don't put all your eggs in one basket – a basic rule of risk management, firstly due to the occurrence of an event. But when we talk about investments, in addition to being prudent about losing positions, it is also prudent to balance the results, because if an asset suffers losses, other products generate some return or even above-average results.
A good investor has a more global vision of possibilities and understands that balance brings very important financial and psychological comfort.
There are 4 ways to win in the market, by probability areathat is, entering a price in some asset and it moving in the direction of gain or even limited loss, market wear and tearwhich is graphic noise, a quote moves and returns and does not deliver results from a single position, but is extremely efficient in fractional positions, interest rates and premiumscoming from fixed income and futures markets and dividends and interest on capital.
A balance between these products generates a continuous condition of progression of volume gains that represent more dividends, financial gains that represent appreciation and fees that convert into more volume.
Analyzing the Brazilian market, it is still a very young market, not because of its age, but because of the products it offers. Little by little, we see new products arriving, allowing for greater operational efficiency. These products have existed for a long time in more mature markets, such as a volatility index that compensates for a large rate by being placed in the opposite position.
The market always has 2 objectives: to share risks and gains and to achieve growth through the generation of wealth from companies, commodities and other interest-generating products.
Returning to diversification, it can be independent of having several assets, that is, a large portfolio and different derivatives, allowing today that a single product with its derivatives creates the diversification of movements between rise and fall, forms of profitability and balance.
Knowing these dynamics and balances is essential to have an efficient management model, with low variation latency and a very satisfactory compound interest curve – all of which can be dollarized using Dollar futures contracts, in whole or in part, without needing to operate in another market to seek exchange rate protection.
Returning to the subject of diversification, in contrast, single positions are extremely powerful, both for gain and loss. In this case, risky activities are recommended in a smaller portion of the portfolio, while also being a form of diversification, now with a smaller portion of the group seeking more explosive opportunities.
And how can we define this portfolio of opportunities within a more protected and diversified portfolio? Well, we have references that can be used, how about using an average rate of an at-the-money option to define the financial volume to use, for example, if a Bova11 option that is very tied to the IBOV generates a rate of 6% for an expiration of 20 trading sessions, which is a little high, demonstrating a strong fall in the market, you can use this 6% financial reference to risk on uncovered assets, if the market is more positive, has risen, this rate can already be lower, something around 3% for example, naturally do not expose more than this for bullish positions for the moment.
But these are operating techniques; perhaps an investor wants to allocate a fixed fraction of 10% of the portfolio to freely moving assets and with a longer term of possible positive results. It is up to the investor, within their risk level, to reflect and choose a risk model, and to apply the assets and opportunities identified in it.
It is important to maintain diversification, usually triangulation, between fixed income and assets, assets and their derivatives partially covering the portfolio, or even a well-diversified portfolio of assets from different sectors. In the next article, we will talk about the triangulation between fixed income and assets and what the conceptual logic is that allows maintaining fixed income, assets in the portfolio for some periods or even a division between both.