I want to take into account of the current low finance costs embedded in futures prices to achieve to invest passively in equity indices in a five to ten year time horizon. I would appreciate other people views on my of idea (is this really bad) of using spread betting to achieve this and in particular should I be utilising Stop losses.
My plan is to go long on a proxy for MSCI World Index ( SP500, FTSE and EURstoxx initially) with 25% held in cash for margin requirement (i.e. four times leverage). I’m planning to use quarterly futures and I’ve estimated that the trading costs (implied by the spreads) will be around 0.3% to 0.4% p.a. on equity exposure (similar to passive funds). With another 75% invested in (non leveraged) ETFs (held by the same spread trading company) to act as a second tier collateral in case my margin account gets low or to high. The 2nd tier collateral (ETFS) will be in Gilts and other asset with low volatility and low or negative correlation to equities. I’ll monitor the leverage and aim to keep it between (3 and 5 times) by investing and disinvesting from 2nd tier collateral fund. To help avoid timing issues I’m planning to linearly increase my exposure over a two year period every month.
Based on low base rates and finance costs I think this is workable strategy to invest in the long term this way but would like to get feedback in case I’ve missed anything. For example I’m not planning to use any explicit Stop losses as I don’t want them automatically triggered without making an investment decision?
My plan is to go long on a proxy for MSCI World Index ( SP500, FTSE and EURstoxx initially) with 25% held in cash for margin requirement (i.e. four times leverage). I’m planning to use quarterly futures and I’ve estimated that the trading costs (implied by the spreads) will be around 0.3% to 0.4% p.a. on equity exposure (similar to passive funds). With another 75% invested in (non leveraged) ETFs (held by the same spread trading company) to act as a second tier collateral in case my margin account gets low or to high. The 2nd tier collateral (ETFS) will be in Gilts and other asset with low volatility and low or negative correlation to equities. I’ll monitor the leverage and aim to keep it between (3 and 5 times) by investing and disinvesting from 2nd tier collateral fund. To help avoid timing issues I’m planning to linearly increase my exposure over a two year period every month.
Based on low base rates and finance costs I think this is workable strategy to invest in the long term this way but would like to get feedback in case I’ve missed anything. For example I’m not planning to use any explicit Stop losses as I don’t want them automatically triggered without making an investment decision?
Long Term investment Equity investment
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