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Reasons for using the long and short positions in the market effectively

A long short fund makes use of several long positions to buy stocks or assets with potential value and at the same time shorts overvalued stocks and securities. A new strategy in the financial world, top asset management companies in India use this strategy to maintain a favourable position in the market.

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Reasons for using the long and short positions in the market effectively

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  1. Reasons for using the long and short positions in the market effectively www.avendus.com/india

  2. Introducing long-short funds A long short fund makes use of several long positions to buy stocks or assets with potential value and at the same time shorts overvalued stocks and securities. A new strategy in the financial world, top asset management companies in India use this strategy to maintain a favourable position in the market. . www.avendus.com/india

  3. What is the investment methodology behind this strategy A long short fund invests 130% of their capital in buying new stocks and securities that show significant signs of growth by selling 30% of stocks that seem redundant to the investors. This methodology is also the reason why this strategy is called the 130/30 strategy and it works efficiently in limiting the drawdown risks. www.avendus.com/india

  4. What are it’s advantages? Diversification – For investors looking to diversify their risk and willing to hold onto an investment for a longer period, this strategy may provide stability throughout the market drawdowns. Returns – Holding on to the investment for a long time allows you to ride the drawdowns of the market and then enjoy the substantial rise that follows which are a great source for excessive returns. Use of shorting – Unlike mutual funds who are not permitted to use short selling, top asset management companies in India use this fund to enter a fresher long position in the market. www.avendus.com/india

  5. What are it’s disadvantages? Expensive – As compared to the humble 0.6% expense ratio of mutual funds, a long short fund can be expensive for an investor and impact their final returns as their expense ratio goes to up to 2%. Unidirectional markets – The usual trend in the market goes only one ways. Therefore, investors can either profit off the short positions or the long positions. Since this fund enters both these positions together, it might impact the returns based on the strategy used. Risky – High rewards come with higher risks. Since these funds are not regulated by SEBI, the investors often find themselves without the safety net of a regulatory body. www.avendus.com/india

  6. Future in India With the global hedge funds industry hitting USD 3.2 Trillion, the local industry is bound to follow and the focus of top asset management companies in India will stay on long short funds. www.avendus.com/india

  7. Thank You www.avendus.com/india

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