IskraIndex Ideology

Any bank deposit can be considered a type of investment - with zero risk and a guaranteed expected return. The main advantage of such an investment is the guaranteed result (return of principal + interest). However, if the deposit is large, this guarantee of profitability disappears, since deposit insurance systems in different countries have a not very high coverage threshold. Another advantage of investing in a deposit is the ease of registration - it can be opened in five minutes in a banking app.

If we consider a deposit as a type of investment, then there are alternatives to deposits - they offer no guarantee but carry a higher expected return. Such investments represent a medium- or long-term portfolio of securities. Low-risk portfolios have an expected return slightly higher than a deposit and consist of debt instruments (bonds, REPO contracts, promissory notes). High-risk portfolios include securities that offer a significantly higher interest rate compared to deposit rates. The weighted long-term portfolio approach is very similar to the savings model of a deposit - instead of a deposit, a brokerage account is opened, funded with money, a model portfolio is compiled, and sent to the broker for execution as individual orders or as a whole.

The widespread adoption of ETFs opens up the possibility of building portfolios based on asset class indices (stocks, bonds, real estate, etc.). This allows for maximum portfolio diversification: it eliminates the specific risks of individual instruments by using indices from various geographical segments and diversifying them amongst themselves.

To obtain the optimal combination of indices, mathematical optimization is required, which will make it possible to find, among tens of thousands of possible combinations, the portfolio where the expected return for each level of risk is the highest. IskraIndex helps investors identify precisely such portfolios.

IskraIndex offers two types of model portfolios: Deposit+ and Idea. In the latter case, it involves optimizing a portfolio around one of 8 preset investment ideas, with the share of any one of them in the portfolio assumed to be 20%. In either of these options, the investor is recommended to take a risk profile test so that the investor has an understanding of which risk level is best to target. After receiving the portfolios, the investor must send trade orders to the broker to align the actual portfolio with the model one.

More details about IskraIndex model portfolios