A Multi-Asset Class is a mix of asset classes (e.g. currencies, stocks, commodities, metals) used as an investment, hence creating a portfolio of assets, as more than one asset class is present. Here are several key reasons why your brokerage should consider offering these.
Diverse Opportunities
The opportunities are endless for multi-asset trading because when one market is trading flat (when one sells a stock at the same price one bought it at), other markets are most likely active. This creates an advantage over single asset traders because with wider exposure through a variety of products, multi-asset traders can capitalize and make the most of both rising and falling markets. For example, a multi-asset trader can hold a long-term stock position while performing short-term trading such as day-trading futures concurrently.
Asset Allocation
Each asset class is unique and thus performs during different stages of the business cycle. Therefore, multi-asset traders can pinpoint these cyclical performances and allocate their capital accordingly to specific assets that has the most potential for profit. This strategy is called tactical asset allocation and it requires access to a wide variety of financial instruments and multiple asset classes. By carrying all these products in one venue, your brokerage will provide immense convenience to these traders.
Hedging
Hedging is very effective as a risk-management strategy against short-term volatility for the core investments of your traders. For instance, if a trader is holding a portfolio of large tech stocks but is pessimistic about the impact of an upcoming announcement, the trader can take a short position on a representative index such as Nasdaq. During the event period, if the trader also has access to derivative products such as futures and options, the person can exercise further hedging opportunities. Doing this would reduce the potential loss the trader might have incurred, but at the same time, also reduce the potential profit that the trader might gain. But in all scenarios, create greater trading volume for the brokerage.
Diversification
Constructing a diversified portfolio is one of the key principles to investing. Multi-asset traders cut down on risks by ensuring their investments are not overly focused in one specific area. This makes it easier to go through volatility swings while attaining stable returns. Most traders may only diversify across sectors but attaining positions in various asset classes such as stocks, commodities, and forex will make a truly well-diversified portfolio.
Leverage
Multi-asset brokers commonly offer a margin account to their clients so that they can trade derivatives with leverage. Traders with experience tend to prefer trading with leverage as it can amplify their gains. It allows traders to venture into markets that would otherwise be unavailable without a leverage as well.
Having access to a wide range of investment products is advantageous to not only retail traders, but brokerage companies as well. From the point of view for brokerage companies, multi-asset brokerages would have the competitive advantage over other brokerages that does not allow traders to connect to multiple assets due to the complexity of requirements for connecting to multiple venues.
With Broctagon’s multi asset classes, multi-asset trading can become far more accessible and cost-effective for brokerage companies looking to expand their horizons, stay competitive and attract a larger clientele base.
