Daily Leverage Certificate: Basic Knowledge You Need To Know Before Trading It (Guest Post by InvestingNote)

The Daily Leverage Certificate is a product launched by SGX that was offered by Societe Generale since 2017. This product is available for trading on the SGX securities market.

DLCs are slightly complex, moderate risk financial products which give investors a leveraged return

based on the daily performance of an underlying reference index.

DLCs have a finite lifespan and will be delisted on its expiry date. The final exercised

value of the DLCs will be calculated and paid to investors automatically on the expiry

date (which is after 3 years).

Note that: (if the Expiry Date is not a Business Day, then the Expiry Date shall fall on

the preceding Business Day and subject to adjustment of the Valuation Date upon the

occurrence of Market Disruption Events as set out in the Conditions of the Certificates)

What is a DLC?

The Daily Leverage Certificate offers investors fixed daily exposure in the following 3

leading Asian Indices as well as single stocks .

It also allows investors to leverage and

capture amplified movements of the reference index.

Investors can either buy "Long DLC" or buy "Short DLC", as the two types of DLCs allow you to bet on both the rises

and falls of the underlying asset respectively.

The underlying indices that the Daily Leverage Certificate will track are the 3 key indices

in the Singapore and Hong Kong exchanges:

● MSCI Singapore Index (SIMSCI)

● Hang Seng Index (HSI)

● Hang Seng China Enterprises Index (HSCEI)

And below are the some of the single stocks that Daily Leverage Certificates track:

Singapore:

➢ DBS

➢ OCBC

➢ UOB

➢ Venture

➢ …and more

Hong Kong:

➢ Tencent (700 HK)

➢ PingAn (2318 HK)

➢ Geely Automobile (175 HK)

➢ Hong Kong Exchange (388 HK)

…and more

What DLC does that really attract investors is that it increases investors' returns as it

increases investors' exposure level to the indices.

How Does it work?

The basic principle is pretty straightforward – let's say if the underlying index moves 1%

from its closing price of the previous trading day, the value of a 3x DLC will move by 3%,

and that of a 7x DLC will move by 7%.

DLCs offer a fixed leveraged return of 3, 5 or 7 times of the daily performance of the

underlying asset. 3x simply means it is 3 times leverage and 5x means it is 5 times

leverage (so does 7x) . Leverage amplifies the returns and losses of investors, be it rising

or falling market.

Currently 3x, 5x and 7x are available for indices and only 5x is available for single stocks.

Below is an illustrative returns for an investment of 1 unit of the 3x Long DLC, that was

bought at $2.00 when the 3x Leveraged STI Index was trading at 9,000 and sold on the

same Trading Day.

What are the fees like?

Management Fee per annum 0.40%

Gap Premium per annum

(a hedging cost against extreme market

movements overnight.)

3x : 1.8%

5x : 3%

7x : 4.2%

Who will find it useful?

Of course, DLCs are not meant for everyone. They are meant for sophisticated retail

investors who wants to do short term trades.

It is also suitable for investors who would like to have leveraged returns form the daily movement of the underlying assets.

At the same time, all investors need to be Specified Investment Products (SIP) qualified

to invest in DLCs.

Those who are not familiar with DLCs or do not have high risk

tolerance should not consider trading DLCs. One should only consider trading DLCs if

you have a high risk tolerance.

Special feature: The Airbag Mechanism

With the Airbag Mechanism, now you don't have to worry that there will be a risk that

losses may exceed deposits as each DLC will have a pre-set trigger for its air bag.

Now what exactly does "Airbag mechanism" mean?

For example, if you were to buy a stock on a 5:1 margin, a leverage of 5x is used and the

underlying asset losses 10% of its value, what it does is that the air bag trigger will come

into effect to automatically trigger an intraday reset of the underlying index.

The airbag mechanism will only be triggered if the underlying asset moves in the opposite direction

of the product. For example, if the STI rises by 20%, the airbag mechanism for the 5x

Short STI DLC will be triggered.

But do take note that the air bag will not prevent you from losing your entire investment

where the leveraged movement of the underlying reference index exceeds the value of

the DLC.

For example, a 5x DLC, with an airbag that is set to trigger if the underlying reference

index falls by 10% will become futile its underlying reference index suffers a sharp fall of

20% or more in the course of a trading day, or at opening of a trading day due to

overnight movements.

In a nutshell...

Other than stock market indices as we mentioned earlier, there are also more than 50

DLCs for 20 regional blue chip stocks ranging from DBS to Tencent, as the underlying

asset! Check out the full list of DLCs here .

For investors who want to maximise their short term exposure to market movements,

DLCs can provide the opportunity to increase the exposure by a fixed factor, up to 5

times.

For indexes, you can select a leverage from 3x, 5x or 7x!

Also, it doesn't matter if the market is bearish as well – you can buy a short DLC to

capitalise on a bearish situation.

For the 5x DLC with Venture as the underlying asset, it actually yielded a return of more

than 70% in a week, just back in February!

To have a better understanding, check out the full educational series here .

Last but not least, if you've never traded a DLC and would like to know how, see if you

qualify by taking the Specified Investment Product (SIP) test here .

Guest Post by InvestingNote. "InvestingNote is the first and largest social network for investors in Singapore. Find out more about us here.

3 Simple Steps to Start Stock Investing - Guest post by Ethan Ho (InvestingNote)

This is a Guest post by one of the geniuses at InvestingNote. Awesome article, check it out here:

In a previous article titled ‘5 reasons why stock investing is so difficult to start’, I’ve mentioned the reasons that often become excuses, serving as inhibitions to the journey of stock investing. Many people have asked me how to address these reasons and the answer is simple: confidence.

However, not many people notice that it is their lack of confidence that affects their first step to investing, as opposed to risk appetite.

These are the 3 simple steps to boost your confidence, which will help you make your first investment.

1.  Acquire financial literacy

Financial knowledge and literacy is essential for anyone to start investing. The fundamentals of stock investing are best found in their original state: books. Learn financial terms, explanations, logic and theories traditionally at your own pace. Grab a coffee and start hitting the books like you’re a student again.

The only drawback? There are many financial books out there that are similar but different. In that case, maybe just textbooks will suffice?

Alternatively, you can also go for courses conducted by stock educators. Most courses require a fee to attend, but some are free. The SIAS and SGX Academy both provide some basic investing courses for free. You can check them out here www.sias.org.sg or www.sgxacademy.com. Otherwise, there are many organizations and stock educators out in the market that charge a substantial fee for advanced courses.

Also, start reading business and financial news that often highlight the more important things. For example, what affects the distribution per unit (DPU) for Real Estate Investment Trusts (REITs)? How do companies restructure in recession to sustain equity value? How does economic data like purchasing managers’ index (PMI) and non-farm payroll affect markets and stocks? What stocks are most affected by currency and interest rates?

News will highlight the important things that every investor should know. While saving you a fair amount of time, it also lets you familiarize with the myriad of financial terms and jargons, and keeps you updated on market happenings.

2. Practise through simulation

Regardless of whether you choose to get the basics via the traditional way of reading books or by attending some courses, the overall learning process is incomplete without practice. What better way to practice other than simulation?

Simulation boosts your confidence by allowing you to mimic the actions you would take in reality, without having to bear the costs.

Practising through simulation is also particularly useful to gauge your own investment decisions. If you’ve predicted the stock price to either go up or down, simulate the trade. This way, you can know how accurate your analysis is.

There are many websites that allow you to simulate trades, like Marketwatch.com and Investopedia.com. Start trading with virtual money based on real stocks. Other than simulation, you can also make projections on a stock, on platforms like InvestingNote. Rather than just fluctuations ups or down, you can estimate a stock’s final price based on your own time frame and target. A notification will be made if it’s a hit or a miss within stipulated time, for you to gage your own judgment. Simulating and estimating trades based on stocks in real-time will definitely speed up the learning process and build confidence.

3.  Learn from experts

The last step for your journey in learning how to invest is to learn from professionals or experienced investors themselves. Start attending free talks, seminars and fairs. Invest Carnival, Invest Fairs and private seminars are often held by ShareInvestor, SGX and brokerage firms like PhillipCapital. Attending such talks and seminars given by experts will give you a better idea of the significant things that are relevant to beginners.

If you’re the keen learner who’s always asking questions, try leveraging on the experts found on social networks like Facebook discussion groups or the social trading network InvestingNote. Being within a social network not only allows you to see what experts are thinking when they post, but also includes you as a part of the stock investing community. Never be afraid to ask questions and interact with the experts and the experienced. Learning is at its best when transformed into a two-way interaction. Information becomes communication and it empowers personal learning. Also, keeping up to date with the latest financial news and trending insights will give you that edge which traditional textbooks won’t.

It becomes a virtual classroom. It’s almost like you’re having a tutor at your fingertips, except that there isn’t only one but many. By tapping on social networks, it will expand your personal network and interaction with experts and the experienced who are otherwise remotely located.

If you’re lucky, you just might find an expert whose investment style suits you the best and doubles as your mentor. Mentorship is equally as important when it comes to stock investing.

After you’ve taken these 3 important steps, you will gain more confidence to start investing, and build good investing acumen.

  

At which step are you currently at now? 

Written by Ethan Ho

From InvestingNote

The social network exclusively for stock investing, InvestingNote is a free, social network platform designed specifically for crowdsource investment ideas, news and interaction for the stock investing community. Besides having access to stock data, users can upload research reports, utilize technical charts and make stock price targets that will be visible to the entire community. Users can also gain reputation points when they have followers, likes and posts. 

www.investingnote.com

5 reasons why stock investing is so difficult to start - Guest post by Ethan Ho (InvestingNote)

This is a Guest post by one of the geniuses at InvestingNote. Awesome article, check it out here:

You have probably heard stories of people who’ve made investments. These people range from veteran institutional investors like Warren Buffet, Carl Icahn to associates, friends and little known hearsays. The similarity is, all of them have made some sort of money. But what stops everyone from doing so?

You’re probably reasoning that the big boys can make money because they already have the capital, skills and maybe some insider info.

Isn’t it obvious enough? True only to a certain extent.

Let’s break down the 5 actual reasons why investing seems difficult for most:

1) Steep learning curve

If you’ve never taken a finance course back in school or know absolutely nothing about finance, the thought of investing might scare you. Assessing the valuation of a stock through the company’s profile, financial reports and even research firms’ projections is terribly time consuming. There’s fundamental analysis and then there’s technical analysis. Each is a separate school of thought in investing. Learning both to hone your trading skills on your own is just way too time consuming.  

2) Barriers to entry (a) Knowledge

Let’s face it: to be able to learn finance in school is a privilege. A privilege that is often invisible to those who study it as part of their majors. For the same amount of time taken to take a bachelor’s degree, business finance majors spend all their time honing their skills that aids them in making informed investment decisions as compared to their non-finance peers. Many of us who’re not specialized in finance can definitely relate to this. Of course you can learn it by yourself, but what we’re really saying is that the high barriers of entry due to the inherent complex nature of finance makes it harder to do so. Furthermore, finance courses by stock educators and professionals can cost thousands of dollars just for a few lessons. All these are barriers to entry. Sometimes to the extent to which people give up on learning and being interested midway.

3) Barriers to entry (b) Capital

Another barrier to entry is capital. Let’s just talk about the local stock market. Before shares trading were reduced from 1,000 shares to 100 shares per lot, it implied that only people with a decent amount of money could invest. Let’s take for example, Singtel’s stock. It trades within range of $3 to $4. So the minimum capital required to buy just one lot of shares would be $3000 to $4000. To some, it might seem reasonable. But remember that a stock bought is an opportunity cost to diversification.

4) Lack of role models

We all know that when it comes to learning about investing, it can get really lonely. Like with every skill, role models are an important contribution to the learning process. A role model can either be a professional or someone with experience. In the world of investing, nobody can be held responsible for your gains or losses. However, it would help if there was a role model or mentor to guide your learning process with a certain direction and investing styles. It makes the entire learning and investing process much pleasurable and easier to follow. Most the ‘mentors’ and ‘role models’ out there usually charge a fee for students to take up their classes and workshops. Hence, role models seem to be an optional and expensive choice, rather than serving as modest mentors.

5) Fear & Risk

You’ve probably heard stories of how people got ‘burnt’ by trading stocks. It can range from big losses to bankruptcy. Such stories aren’t exactly encouraging with the steep learning curve in the complex world of stocks. Studies have shown that people are also more contented with not losing, rather than not winning. As a result, fear ensues and stops many people in their tracks to invest.

Another key deterrent is risk and uncertainty. As you already know, every reward begets a certain amount of risk. If it doesn’t, it probably harbors a scam. In the stock market, risks are aplenty. Other than just stock-specific risk that stems from the company of a particular stock, there is systematic risk. Systematic risk unlike stock-specific risk, cannot be diversified. For example, the recent oil glut has impacted many companies in the oil and services sector. Most of these are fundamentally strong companies, but were still heavily affected by adverse market conditions. Market volatility and uncertainty caused by geo-political risks are also part of the equation. Terrorism, global warming, law and the increasing interconnectedness of the global economy- makes it very much harder to divert risk, especially when you’re new to the game.

These are the 5 reasons that I’ve personally struggled with before I started and some of these reasons are still relevant.

What are some of the reasons that didn’t get you started?

Written by Ethan Ho

From InvestingNote

The social network exclusively for stock investing, InvestingNote is a free, social network platform designed specifically for crowdsource investment ideas, news and interaction for the stock investing community. Besides having access to stock data, users can upload research reports, utilize technical charts and make stock price targets that will be visible to the entire community. Users can also gain reputation points when they have followers, likes and posts.

http://www.investingnote.com