WHY CAPITAL MARKETS MATTER MORE THAN EVER Citi Global Wealth PUTTiNG YoUr CASH To worK iN A HiGHer rATe eNviroNMeNT | | 44 Investments Volatility as an investor wHAT To Do Now? opportunity In an uncertain market, strategies such as However, what if you could make this volatility “getting paid to wait” present a compelling work for you rather than against you? Consider proposition for suitable investors with two investors, Jack and Jill. Both Jack and Jill undeployed cash. With inflation at double- are keen to enter the equity market and have digit levels in many countries, the cost cash waiting on the sidelines to do so. Jack of holding cash has risen dramatically. anxiously watches the markets, hoping for the Investors who refrain from investing now market to drop to a level where he would like to for fear of a further leg down in equities buy. Jill, on the other hand, enters a strategy should consider the erosion of their cash’s where she gets paid an income on her cash while purchasing power. she waits, in return for potentially buying into Suitable investors seeking to increase their the equity market at lower than today’s level, equity exposure should consider their cash where she would be happy to have exposure. position and explore appropriate capital Six months later, the market has indeed markets strategies for putting it to work. dropped, and Jack invests. Jill automatically Such opportunities may offer above- buys at this level also, and they both have the average yields or the opportunity to gain same equity exposure that they initially wanted. exposures to markets at more attractive Jill, however, has income already banked. levels, a trade-off worth considering for sophisticated, suitable investors. But what if the market had never dropped and instead had gone up? Both Jack and Jill are left kicking themselves, as they have missed out on making their investments. But Jill can console herself, as she has income that she received as “payment for waiting,” as well as her originally invested cash. Jack simply rues his lost opportunity, having neither his desired equity exposure nor any income. 11