Frequently Asked Questions
- What is the Strength of the Index Long-Term Strategy?
- Investing in Index
- Protection
- Interest Arbitrage using Futures and Debt
- Well-disciplined Strategy
- Technology equipped to identify real-time opportunity
- Easy to understand
- Payment Options available
- How much funds or collateral is required for Power Booster Plan?
- Total Exposure-100%
- Collateral (Stocks / MF / Debts) – 30%
- Cheque/Initial Investment – 10%
- Monthly SIP – 1%
- What will be the probable Cost Calculation?
- Hedging Cost – 5%
- Financing Cost – 5%
- Gross Cost – 10%
- Saving of Interest on Rest 90% (90*9) – 8.1%
- Net Cost – 2%
- The above cost is without considering AMC fees.
- Why do I need to add funds annually to Power Booster Plan?
- In Power Booster Plan, we invest only 10% of funds initially to make a portfolio of 100%. So, strategy bears the cost of Hedging and Financing in the trading account while the investor saves the interest income somewhere else on the rest 90%.
- So, Investors need to bring that interest earnings on a regular basis to handle the cost of Hedging and Financing.
- Why do we need to make SIP Investments?
- Many times, we may get the opportunity to shift the current position to the next strike. We may require funds at that time. So, it will be a prudent step to put monthly SIP, instead of 10% amount at one shot at the end of year. It will ensure that we may not lose any opportunity in between the year.
- Secondly, it will also help investors to arrange the required funds easily during the full year.
- Where will you keep this SIP money?
- We will park this SIP money in Debt funds / ETFs so that Investors can get the optimum utilization of funds. We normally don’t keep any idle funds in the account of Investors.
- What should be the logical period of Investment in this strategy?
- 5 to 10 Years is the logical period.
- Do we use the full margin?
- Kindly be aware that ILTS is a strategy designed for the long term, and the margin requirements are subject to periodic adjustments based on market volatility and other influencing factors. Consequently, it could pose challenges for investors to arrange additional margins during their investment journey. To mitigate this situation, we strongly advise investors to maintain a buffer margin in advance. To ensure preparedness for any unforeseen circumstances, it is recommended to keep at least 30% of their exposure as a margin.
- This will help safeguard against unexpected margin calls or emergency requirements.
- Why do we need to put a 10% cheque initially?
- In the ILTS strategy, we need to purchase protection, so we need to put cash to pay for the premium. Secondly, Futures forwarding cost also requires cash. So, we need to put at least 10% amount by cheque to handle the Hedging and Financing cost of the Power Booster Plan.
- How much cash or collateral margin is required?
- As per SEBI guidelines, the Investor can use 50% margin as collateral margin, rest 50% margin should be kept in the form of cash or cash collateral. We always try to keep track of this so that investor can get optimum utilisation of funds.
Happy Investing!
This article is for education purpose only. Kindly consult with your financial advisor before doing any kind of investment.