Leveraging reward in risk

Leveraging reward in risk

If you’re like most people, you’d like to make more money from your investing.  Because more money from higher returns means more spending power, greater financial security, and the potential to achieve your goals sooner (and more goals, too).  However, we know of no investment strategy that can promise higher returns without also promising higher risks. And this means a greater chance of losing at least some money for a period of time.

If most people would like to make more from their investing, most people are actually unwilling to try to achieve it. They’re risk-averse with money. The thought of losing hard-earned cash can lead them to reject investments that actually have a far better chance of making significant returns over time.  They feel happier with intrinsically low-risk or risk-free savings products, and as a result accept lower, or even zero, real returns.

More sophisticated investors know the financial benefit of choosing higher risk products such as shares and use well-established techniques to balance this risk. The most popular way of doing this is by diversification: building a portfolio containing a wide range of assets, ideally from unrelated market sectors. However, the disadvantage of this approach is that if successful it’ll only increase returns by a percentage, not an order of magnitude. And therefore, it can take years, if not decades, to get the full advantage of exponential return.

So, ask yourself a fundamental question about balancing risk and reward.  "Is it better to risk a dollar for a potential return of ten cents?  Or to risk ten cents for a potential return of a dollar?"

It comes as a surprise to many long-term investors that their risk / reward ratio is so heavily biased one way. Which is why they all suffered significant losses when markets crashed due to the Coronavirus.

"At Exinity, we believe in a completely different approach to maximising returns over time” says Co-founder Olga Rybalkina. “Our clients use trading instruments, make more frequent transactions and apply the principle of leverage.  Rather than slowly accumulating a pot of assets and risks over time, they make lots of short-term, high-risk trades which they convert back into (zero risk) cash after every transaction."

At first glance, the idea of making consistent returns from high risk products is counter-intuitive.  But the fact is that a few highly successful trades can outweigh a larger number of losing ones – provided you can control the amount of those losses.  Many professional traders only make money from 30% of their trades but come out ahead over time.  Some will even tell you that losses are necessary, as they help you to learn and improve. The long-term risk is therefore less to do with the individual trade and more, as Warren Buffett said, from ‘not knowing what you’re doing’.

"So, we have an important responsibility to our clients” says Olga. “We have to ensure they have the knowledge, skills, tools and support to trade with confidence.  Understanding the principles of trading and developing an effective strategy can help them make good returns in both rising and falling markets, but this does require discipline and a consistent approach."

"Exinity is a new concept in wealth acquisition: we’re offering a global community of ambitious people access to a range of higher-risk investment products, but fully supported at all times through comprehensive coaching and operational support."

They get this package through a mobile app, which comes with both comprehensive markets access and a host of risk management tools as well as unique support features. In short, "at Exinity we aim to give our clients the freedom to succeed, on their own terms and on their own merits. And we give them all the equipment they need to do just that."

The Exinity offer won’t appeal to everyone, just as mountain climbing or scuba diving doesn’t - but if you’re willing to risk something a bit different, the rewards of any market, whatever the conditions, are there to be had.