It is also true for leverage products that only those who know and understand the product can correctly assess and assess their opportunities and risks. Because the market undoubtedly offers both. The so-called leverage offers disproportionate price opportunities, but also just as great risks.
The abundance and different type designations of leverage products may seem a bit confusing at first glance, but they all have in common the leverage effect known from physics. In this way, even large loads can be set in motion with relatively little physical strength. This is also the case with leverage products. With little capital investment, high profits can be achieved in the best case. Conversely, however, very high losses are also possible. While a direct investment in a share sometimes has to dig deep into your pocket in order to generate attractive income, a comparatively small investment is sufficient for leverage products.
Admittedly, it is not easy for completely undefiled investors to dive into the world of leverage products, i.e. warrants and knock-outs. The entry barrier should not be underestimated here. However, this is justified due to the increased risks.
The all decisive criterion for a successful investment in leverage products is first of all the market opinion. And those who decide themselves who would like to invest without prior advice have to work out this independently anyway and form them on the basis of information. It must be clear to the potential investor that leverage products behave differently in relation to various factors, such as volatility. Investors can only successfully invest in leverage products if they understand the influence of these factors. Even if the general public repeatedly claims that trading in leverage products is pure “gambling”, leverage products have nothing to do with it. Rather, it is an expanded and extremely sensible form of action in the context of portfolio design. Even in the private depot, these products can be beneficial as well-dosed admixtures and improve the overall return. In addition to the function as a hedging instrument, for example against falling prices, leverage products have another property. They can make their contribution to the necessary broad diversification in the portfolio. Diversification is the buzzword here, and for many investors it is almost a panacea for generating returns at all in the low interest rate environment.
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