As we all know, investors or traders are advised to trade more than 1 investment tool to minimize risk. This 1 investment instrument can be multiple instruments of the same securities or buy multiple securities at the same time.
For individual investors or individual investors Ordering multiple instruments at once can be very difficult. investment portfolio This type of investor consists of only a few securities.
Of course, this won’t work for institutional investors. This is because institutional investors can invest in tens or hundreds of securities at once. In fact, they need to be actively managing their investments. So that in one day they will be able to carry out several large transactions at once. to accommodate this need Now there is an investment and trade feature called basket trade.
Understanding the basketball trade
Basket trading is a feature that allows investors to trade multiple investment instruments simultaneously in a single order. This feature is important for institutional investors to use. This is because multiple assets need to be traded at the same time in a single transaction.
Although widely used by institutional investors But retail investors can also use the basket trade feature. However, investors need to trade at least 15 instruments at one time and meet the minimum transaction value to use it.
It is more common practice to buy and sell investment instruments using the basket trading feature in stock transactions. However, this feature can also be used for trading other instruments, be it forex or trading. Derivatives.
How does basketball trading work?
To understand how this type of transaction works Let’s look at an example of an investment manager who manages index funds. An index fund is a type of mutual fund whose prices move based on the movement of the index used as a reference. For example, for an IDX30 index fund, the price movement of the mutual fund must be within a short distance of the IDX30 price change.
Investment managers who manage mutual funds put most of the investor’s money into stocks. that are members of the IDX30, while a minority will be allocated to other instruments.
The allocation for each of these instruments is determined by the investment manager in Fund Information Sheet (FFS)One of the obligations of investment managers is to ensure that their investment allocations are consistent with what is written on the FFS and that the value of the mutual funds they manage does not differ from the benchmark index. very much
The problem is stock prices and other investment tools. very volatile To reduce the risk of investment allocations that are not compliant with FFS, investment managers need to trade multiple IDX30 shares simultaneously in a single transaction.
So how will the investment allocation be divided between one instrument and the other? There are several provisioning methods in this feature. which are allocated based on the specified dollar amount and pre-determined investment amount or use a special percentage.
For example, Investment Manager A has $1,500 in cash and needs to buy 15 shares at once. If you use the basket trade feature with predefined stocks. Funds from the Investment Manager are automatically and regularly distributed up to 15 shares, each with an additional investment of IDR 100,000.
in some special cases Institutional investors also use the basket trading feature to track the price movements of the assets they are after. In this basket trading there are no real trading assets or investment instruments and are only in the form of . option contract.
Advantages of the shopping cart
- It’s really usable. By using this feature Investors can allocate their investments to various instruments. at the same time quickly and accurately according to their investment strategy So they don’t have to go through the hassle of entering buy and sell orders one at a time.
- Can be customized according to personal needsThe investment allocation using the basket trading feature can also be adapted to the investor’s personal investment strategy. Therefore, this feature can be set to buy only a certain number of dividend-paying stocks.
- easy care. By entering 1 investment order for multiple assets at the same time Investors can easily monitor investment performance. not only that The basket trading feature also allows investors to enter or delete certain investment instruments as needed.
- automatic risk diversificationThere are currently not only 700 stocks listed on the Indonesian stock exchange. But there are also bonds, forex, etc. Diversification between assets is important to reduce risk. This means that your investment will remain relatively safe if the stock market loses. But you also have bonds and other instruments.
- eliminate psychological factors. Because it can be adjusted automatically . The basket trading feature can help investors and traders to reduce the risk of losses due to mental issues such as FOMO or greed, both of which need to be scaled down by traders and investors. Because it has the potential to lead to illogical trading and investment decisions.
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