with Phillip Capital Management
What are Leverage and Inverse Products?
A Leveraged Product is a product that uses financial derivatives to amplify the returns of an underlying index. These products aim to keep a daily constant amount of leverage during the investment time frame, such as 2x or 3x.
On the other hand, an Inverse Product is a product that uses financial derivatives to provide inverse (opposite) returns of an underlying index, allowing investors to profit or hedge their portfolio in a falling market. These products tend to also have leverage of -1x, -2x or -3x.
In a nutshell, L&I products can provide returns in multiple or opposite of the daily return of the underlying index that it tracks.
Introducing Phillip Capital Leverage and Inverse (L&I) products
Benefits of Leverage Products
- Bigger investment exposure to a particular index using less capital
- Daily magnified returns using the same investment amount as an unleveraged investment
Benefits of Inverse products
- Take on short positions to profit from a fall in the value of the underlying index.
- Hedge overall long portfolio (offset potential losses that may be incurred by a long position)
Risks of Leverage & Inverse (L&I) Products
- Market Risk – fluctuations in securities prices that can cause investors to experience significant losses when the market moves against them
- Liquidity Risk – lack of orders in the exchange for investors to trade on demand
- Compounding Risk – gains and losses compounded over more than 1 trading day may cause the performance of L&I products to deviate from the leveraged performance of the underlying asset
- Leverage Risk – whereby losses in the underlying asset will be magnified
- Inverse Risk – whereby the outcome of Inverse Products is the opposite of conventional ETFs
Investors are strongly advised to read the prospectus of the L&I products (linked below) and understand the risks associated with the products before investing.
Product Highlight Sheets
- Phillip MSCI Singapore Daily (2X) Leveraged Product
- Phillip MSCI Singapore Daily (-1X) Inverse Product
Prospectus
- Phillip MSCI Singapore Daily (2X) Leveraged Product
- Phillip MSCI Singapore Daily (-1X) Inverse Product
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