Not only trading: how to use the exchange as an alternative to bank deposits and earn income
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In our blog, we often write about low-risk investment methods that are suitable even for novice investors without much experience. Examples: structural products , model portfolios , investment in bonds using IIS accounts , etc.
Most of these methods involve transactions, but on a modern exchange there are ways to simply place free money - by analogy with a deposit in a bank - and earn income without unnecessary actions. In today's material - an overview of such methods .
Note : any investment activity on the exchange is associated with a certain risk, this must be taken into account. In addition, to use the methods described in the article, you will need a brokerage account, you can open it online . You can study trading software and practice performing operations using test access with virtual money .
REPO transactions
Some brokers offer investors options for placing available funds with a profit. For example, we at ITI Capital provide clients with the opportunity to place money for their use in repurchase agreements secured by highly liquid instruments at current market rates.
It works like this: if for some reason the investor has a balance in the brokerage account that is not employed in the current investment strategies, then he can place them in a repo.
The repurchase agreement assumes that financial instruments (for example, securities) are sold and at the same time an agreement is concluded on their repurchase at a predetermined price. In fact, this is a loan secured by securities. The term of such transactions can be very short, even 1 day - in this case, the investor receives income daily.
Today, using repos, you can get a higher return than the possible income on bank deposits.
An important point: unlike the banking system, there is no deposit insurance system for exchange investments. At the same time, REPO is still a fairly reliable tool - since the central counterparty of National Clearing Center JSC is the guarantor of the execution of the second part of the transaction (that is, refund of money). NCC's sole shareholder is the Moscow Exchange. That is, in fact, the Exchange itself guarantees the return of your money. This is a very high level of reliability.
Investment deposit
Another option for placing free money is the so-called investment deposit. The term of such a deposit can vary from a week to one year. An important difference from many bank deposits is that an investor can always withdraw money without losing interest income.
In fact, this is an analogue of “demand deposits” bank deposits, but with higher rates.
Currency SWAP
According to the definition of the Bank of Russia, a currency swap “is a spot currency exchange (the first part of a currency swap) with an obligation to make a subsequent forward reverse exchange of the same currencies (second part of a currency swap) on a certain date. In this case, the exchange rate at which the first part is exchanged and the exchange rate at which the second part is exchanged are agreed upon by the parties when concluding a currency swap. ”
That is, a swap is a combination of two reverse currency transactions with different dates of execution with a fixed rate. ITI Capital offers the possibility of placing dollars in the EUR / USD currency pair. As a result, the investor receives interest income.
As in the case of repurchase agreements, the Moscow Exchange acts as a guarantor of fulfillment by the parties of obligations.
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