Derivatives are financial instruments whose characteristics are determined by an underlying security, usually a commodity, bond, equity, currency or index. The main types of derivatives are options, futures and warrants.
By buying a derivative, investors can secure the same profit levels as if they were investing directly in equities, but they can do so on the basis of a much smaller cash investment: the derivative instrument costs only a fraction of the price of an equity. Relative to the amounts invested, derivatives therefore make it possible to record higher gains.
Derivatives give investors the opportunity to hedge some or all of the asset classes in their portfolio if there is a chance that these may be subject to unfavourable fluctuations.
Derivatives are ideal for investors who want to manage their portfolio actively but, because of the high volatility risk, they are only suitable for investors who are prepared to follow market trends closely.
Your personal advisor at Fortis can call on all the resources available within Fortis to give you tailor-made advice on derivatives and their added value for your portfolio.
