WARRANTS, STARTING AN INVESTMENT CLUB

Turbowarrants: turbo + warrants

The return provided by the "turbo" is higher than that of equities, but may expire in advance

The "turbowarrant" is a great unknown for much of the financial users due to their recent introduction in many countries as they are very few financial firms that sell this product so special. His appearance of the boom experienced by the stock market in the 90s, from which emerged increasingly aggressive products with which they could obtain a higher return than that provided by equities and derivatives thereof . Therein lies the main attraction for investors, although one must not forget that it is a very risky option.

The "turbowarrants" means a contract or financial instrument that gives the buyer the right, but not the obligation, to buy or sell an underlying asset (stock or future) at a specified price, what is known in financial jargon price " strike "or barrier-at a future date. These products are highly risky and dangerous for the small and medium investors, because if the underlying price reaches at some point the price of "strike" or barrier, the buyer loses the right to buy or sell the underlying asset, and therefore " turbowarrant "loses its value. Given their high risk, it is important that an investor has access to advice from an expert in this type of market that values the suitability of the product contract. From a fiscal standpoint, capital gains are taxed at 18%, such as shares, funds and deposits, other savings products.

Differences with warrants

Both warrants as the "turbos" are derivatives linked to an underlying, which in the case of the latter so far only the Ibex-35, while for the warrants is extended to various indices, equities, commodities or exchange. From this point of view, it is more desirable position in the "warrants" because of financial diversity they offer, and the various investment alternatives. As they do agree is that both are two of the most aggressive in the market. The "turbo" like the "Warrants" traditional, are options to be bullish or bearish on an underlying with leverage, that is, allowing large amounts to invest by putting only a small portion of that money, which is called the premium. As a result, can multiply the gains if the market comes with the position, while losses are limited to the premium paid, ie, the total investment. Just as a "warrant", the "turbo" provide the right to buy (call) or sell (put) an asset at a price linked to a specific date. The main danger is that these can expire in advance if the underlying hits a certain level (barrier), which coincides with the exercise price of the "turbo." If this happens, the investor would have lost their entire investment. The "turbowarrants" are options to invest large amounts by putting only a small part, to which the losses are limited. Their main differences are three vital parameters for its operation:

* Maturity: As the traditional, expiration date, but if the core touches the level established as "strike" (strike price that you can buy or sell the asset) are worth absolutely nothing.
* Volatility: Performs a less decisive role, because the loss in value as they are going to encircling the maturity is less than in the warrants.
* Leverage (increase in profits and financial returns than would be expected): It is generally higher than with the "Warrants" traditional. For each percentage point up the underlying, in this case, the Ibex-35 ", the" turbowarrants "was recorded between 5% and 30%.

Being a little-known investment and dangerous for their aggressiveness is highly recommended that investors ponder the pros and cons that can lead to invest in this type of product.

The pros:

* Has a sensitivity to the volatility less pronounced.
* High leverage, with the possibility of earning more money.
* Assumes an alternative to the bag in times of crisis or stock market volatility, especially for investors with greater experience and higher degrees of knowledge of this market.
* Assumes an option to get high returns, beyond that provided by products related to equities.
* It is a growing financial product, so that opportunities to invest in it will keep on growing.

Cons:

* It is clearly an aggressive investment in that while a lot of money, it also assumes a higher risk.
* The timing of entry is very important, disabling the possibility of touching the barrier.
* As a relatively new, requires a certain degree of knowledge and training on the part of investors.
* This is a very complicated investment in its mechanics, and any negligence can pay dearly.
* Not a product marketed primarily financial institutions, and only a few work with him.

Finantial advice on warrants and futures

The "turbowarrants" is a highly aggressive financial product that requires delicate precautions when taking positions on it, and you should never go it alone when it comes to hiring. As the advisor Jose Antonio Lopez-Esteras Camacho notes, "The first thing is to make the average investor is to make your investment decision in the hands of a financial expert to explain what the product, what are the advantages and, of course, disadvantages that can lead to entry into this market ". The expert knows indicate whether an investment is appropriate for your client to the profile of the investor and the liquidity you have. Not being an investment still widespread, the first problem facing the small and medium investors is the lack of information on its operation. In this sense, the specialists can handle the investment, although there are certain financial intermediaries that offer free courses on these products, but are generally intended for a well-defined social sector: Qualified investors are closely linked to the investment world .

Investment Clubs: Training and premiered in stock & warrants investment

Stock Exchange investment clubs provide access to the company with little money and with the support of other partners who share their knowledge stock. The Exchange draws the savings of thousands of families in our country. Already more than eight million the Spanish invest part of their capital in the stock market. Only in 2007 the trading volume of shares in  Stock Exchange exceeded 1.8 billion euros, the historical record. One alternative to enter the booming stock market is to establish an investment club. These clubs are made by amateur investors wishing to operate in company with small capital. Retirees, students, university students or housewives have made their first steps in the stock market using this option. The clubs are more interesting at times like the present, the prevailing uncertainty and instability stock. Sharing knowledge on economic and business fabric between multiple partners can be very useful for matching appropriate actions successfully and capitalize on accumulated savings.

Investment clubs are a school of initiation for many savers who do not dare to enter the market alone. Its members share a portfolio, chosen among all and also financed with common equity. In the profit sharing, each member receives an amount proportional to each member's contribution to the heritage of the club, that need not be identical. The first requirement is that its members share their passion for the stock market and their desire to learn the intricacies of the market. No need, let alone be an expert in the equity market. In fact, one of its objectives is to promote financial literacy of the people who compose it. To form an investment club that you need only raise a little money and get in touch with a few friends willing to learn.

For the investment club has legal validity must comply with various formalities. The most important of all is that you must register with the tax office that corresponds to the registered office of the club, then you will receive the corresponding TIN. The clubs operate with its own assets, set up legally as a community of property. This Act shall be included in the draft constitution to be club members. In it, include personal data (name, surname, ID number), its share in the capital and other aspects such as the name of the club, its purpose and registered office. This report must be signed by each partner. In addition, club members should draft a charter, which will be the provisions, covenants or clauses which govern the club. They must bear the name of the financial intermediary that will mediate in the purchase and sale of securities, ie a company or broker, which will be the buy and sell on behalf of partners the actions they wish. Keep in mind that not only these intermediaries are allowed to directly execute the sale of shares.

Investment clubs have to have a minimum of five partners. To become the clubs must have at least five partners, but not recommended to exceed 50 members. As for contributions, both those made at the beginning and the additional must be limited in the Statutes. The National Securities Market Commission (CNMV), which is the body that ensures the proper functioning of the stock market suggests that the total amount of individual contributions does not exceed 12,000 euros.

Where do I start investing?

Once formed the club, its members can begin to make the first investment operations. In principle, the clubs invest in equities, but also, according to their expertise and knowledge, can operate in other more complex financial products like derivatives (options, futures, warrants ...). The aim is to gradually establish a portfolio of securities which may be changed as often as desired. In fact function as a small investment fund. To decide which securities to invest, club members will meet regularly to chat about the situation of stock markets, sectors and the most interesting values. Despite his inexperience, club members themselves who are often interested in the progress of the economy, economic news readers, specialized publications, attending seminars ... Club meetings thus become a rich forum to exchange information. It is also very useful to have the testimony and experience of an expert of the company or agency with which you deal values the club, who, as a specialist, can provide interesting arguments for investment. At the end of each meeting, members must make decisions on new settings in which to invest, in what positions and undo what keep the money.

In principle, the club operates as a school of learning for all members, so it is best to settle the profits when they are all in agreement. The settlement would be associated with the dissolution of the club. However, at any time if so stated in the bylaws, members can decide the allocation of a portion of the profits, which is always proportional to the contributions made by each of them.
Who cares about forming an investment club. In principle, part of an investment club interests of all people who love the stock market do not dare to invest on an individual basis and estimate that they would feel more comfortable operating in the company of others. In fact, make decisions together allows for several criteria and also reduces the work of economic information search is advisable to have before going to invest in a value. The most common is that clubs are formed by students of careers in the business world as business administration or economics that bind with the aim of putting into practice the theory they have learned in the classroom and try to also get a extra money from their savings. However, the clubs also form groups of friends, businessmen, housewives and retirees.

Taxation of operations. No special tax is required for transactions by investment clubs. According to the latest income tax reform, which entered into force in January 2007, registered gains and losses on securities purchased through a club taxed the same way as individual investments. That is, you have to pay taxes on 18% of the profits. The payment is distributed in proportion to the share held by each of the partners in the club. How to start a club: Perhaps the most boring and tedious to form an investment club are all bureaucratic and administrative procedures to be made to enroll correctly. Here we summarize now that should not be overlooked:
With the Constitution Act signed (original and copy) and copies of NIF members and the Statute of a club member must purchase a delegation of the Tax Agency corresponding to the registered office of the club in a form called "Form 036-Statement Census. " After its finalization, will have to present it again at the tax office, in the section of the Census, which provided a provisional CIF for six months. Subsequently, the Tax Office will have to submit the above documentation and complete a new form called "Form 600 - Corporate Operations." With all the sealed documents must be re-labeled the Tax Section of the Census in order to access the final CIF Investment Club. In addition, club members should go to the governing body of one of the four Spanish stock exchanges (Madrid, Valencia, Barcelona and Bilbao) for his community be included in the database of clubs, allowing them to access all benefits provided for these entities.

Advantages of belonging to an investment club: Besides the possibility to share knowledge and learn more about the stock market, membership in one of these groups involves a number of other advantages that make it attractive compared to investment individually. Some of them are:
* Lower brokerage fees: belonging to a club can enjoy lower tariffs on the purchase and sale of securities. The "brokers" who work with clubs usually set lower fees for clubs to individual investors, especially when performing a high number of operations.
* Free advice: in many cases, financial intermediaries themselves sent to investment clubs stock reports with recommendations of securities for free.
* Courses and seminars: financial intermediaries and stock markets (Bolsa de Madrid, Barcelona, Valencia and Bilbao) in which registered clubs may also offer the possibility to attend courses and seminars Bag free.

What if I lose money?

In the operations carried out through an investment club can both earn and lose. The bag is not mathematics, so that nobody can know for sure what the gainers in a period of time. In the event that the club was disbanded and portfolio losses, the partners would lose money (each in the proportion commensurate with the contributions made).

However, the idea with which they must create the club is to invest long term in order not to lose. The ideal is to stay at the club an extended period of time (long term is statistically proven that the bag is the most profitable investment assets). Even so, members must know that they can incur losses. However, if several precautions are taken (diversification, building on large values, high dividend yields), it may be easier to reduce the danger.


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