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Why Multi-Asset Brokers Like are the Future of Trading?

InvestorEducation / Learn to Trade Jun 01, 2020 - 10:43 AM GMT

By: Justin_Weinger


Multi-asset trading gives traders the capability to invest in a variety of asset classes, all from one platform. This has now become a widely adopted investing type and is being offered by some of the most reputable brokers around. The evolution of the internet, which has pushed investing from offline (trading floors) to online, has facilitated the rise in sophisticated multi-asset platforms, for the layperson and the retail trader.

These days you can find a selection of some of the industries leading brokerage firms offering multi-asset solutions, including, Interactive Broker, and Saxo. These firms seem to view the multi-asset platform as a key part of their offering.

So what is a true multi-asset broker?

Must they offer all products on one interface, or do they just need to offer a variety of products? In the case of the European regulated subsidiary that runs, they offer a selection of platforms, rather than a choice of asset classes on one platform. This means that using one dashboard you can have access to a variety of financial products, which in their case cover Direct Market Access (DMA), Asset Management, IPOs, CFDs, Thematics and even Spread Betting for UK and Ireland residents.

So what is the benefit of getting all of these services from one broker?

If you have access to a variety of different asset classes you can spot opportunities in some products, when other classes are flat or too unpredictable. If you work with a broker that gives you access to a wide selection of products, you can take advantage of both long term and short term strategies at the same time. For instance, let’s say you hold a Brazilian bond, you may need to hold on to it for several years, while you take the dividends. In the meantime you could also take advantage of short-term opportunities, like commodities trades as CFDs.

Diversification and tactical allocation

Diversification in a trader’s portfolio is an important pillar of investing. By holding a variety of asset classes and investment types, means an overall reduction of risk through exposure. For instance if you hold assets in one area, one strong market move can wipe you out. Diversification means trade successfully in some cases, trade less successfully in others and still stay in the game. For many investors, diversification means exposure across regions and industry sectors, however true diversification means holding positions in a variety of products including ETFs, currencies, bonds, and shares, which include short-mid term trades to long term investments.

The savvy investor is the one who continually rebalances his portfolio to take advantage of different stages of the business cycle. This means reallocating capital to the particular products or classes that show the most profit potential. This kind of tactical asset allocation necessitates the holder to have access to a large selection of assets, which might include safe haven assets in “risk on” markets and shares and currencies in “risk off” markets.

Leverage and limited exposure

A multi-asset broker will often give you access to trade using margin with leveraged trades. This means your capital becomes much more valuable and gives you less exposure to the markets. It also means you can access products that would otherwise not be available to you, as a result of amplified capital.

Take as our example, they offer leveraged trades through their CFD offering. At the same time they offer access to hundreds of thousands of global securities through their Direct Market Access platform This comes with instant execution at the market price, which is usually a farsight less expensive than the typical dealing desk broker’s spreads. Their IPO product which gives traders access to late stage startups would be otherwise very difficult to come by for the average retail investor.

By Justin Weinger

© 2020 Copyright Justin Weinger - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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