Vest, a new online service providing a simple, affordable way for investors to protect themselves from some or all market losses, will launch at the Y-Combinator Demo Day in Mountain View, California on 18 August.
Vest’s service allows users to customise returns on investments by choosing their personal balance of upside growth opportunities with downside protection.
Institutions and sophisticated investors frequently make use of options – complex financial derivatives – to protect themselves from losses on their investments. Offerings via customisable derivatives and structured products have been available for decades, but typically only to institutions or high net worth investors, investing in large sizes (USD500K+).
Vest’s online platform is aiming to open up these protective strategies to everyday investors for a fraction of the price.
To use the service, investors log in to a simple online interface at vestfin.com and choose a stock or ETF, or an existing position. They then select their desired downside protection – up to 100 per cent. The protection premium is calculated automatically, and may be lowered by selecting an upside cap. More advanced investors can explore inverse, leverage, and income strategies, all with the click of a mouse.
Vest’s proprietary technology also powers a platform available through retail and intermediary brokerages, as well as financial advisors.
Research suggests that options-based strategies such as those that Vest offers could provide greater downside risk protection than standard multi-asset diversification programs, especially during significant market downturns. The vulnerability of diversification was on full display during the 2008 financial crisis, when the contagion spread across multiple asset classes.
“We are thrilled to be bringing our new service to market,” says Karan Sood, Co-Founder of Vest. “Our goal is to deliver stock protection strategies to everyone. Our protective service and simple online platform can help mitigate some of the anxiety that everyday investors may feel when it comes to investing.”