Synchrony Index Strategies
As good of advice as this may be, the specifics of how to start investing and where to put your money can be overwhelming. With this article, we shall attempt to explain an aspect of investing called index investing, and how Synchrony can help specifically with getting people into index investing assets in a smart and safe manner.
What is Index Investing?
Index investing is a type of passive investment that focuses on building a return on assets that emulates a broader market index. With portfolio management tools, investors are able to utilize indexes like S&P 500 and NASDAQ 100 in the United States or Euro Stoxx 50 in order to diversify their portfolio through buying underlying shares and managing the portfolio manually. However, it is also possible to use an automotive portfolio management service like an exchange-traded fund, or an ETF (to be discussed later on). In order to have a diverse portfolio, it is important to take into account the specifics of the method you choose to take. A passively managed index and portfolio comes partly with lowered expenses and without the usual and known risks within the market that are offset by diversifying your asset portfolio.
To start index investing, a typical approach for a new investor is to take a sample of the index’s holdings. That way, if there is a dip in the market, the holds will not be completely lost because of one or two assets. There is another way with mutual funds or ETFs. ETFs are attractive to both institutions as a hedging strategy and authorized providers via arbitrage additionally, as shares of the ETF are available on an exchange, an investor can get access to its basket of assets without the need to buy each asset individually and in the correct weights.
As a passive investment, these ETFs lower the fees because you do not have to actively manage accounts or hire someone who manages these accounts, it is managed by the index itself. Since you are sampling different assets within the market, you buy multiple, long term investments, mainly based on their market capitalization. However, some of these assets could have huge holds on the market, in which a dip could be substantial for many. Therefore, it is important to find a well diversified group of assets to mitigate not only the risk of losing a lot of money, but also the potential volatility of one singular asset.
Synchrony Index Investment Tools
Being on the forefront of the crypto market can be a daunting path for new and seasoned investors alike. Choosing the right path to take and making the leap forward into a new asset (or group of assets) can elicit myriad feelings of self doubt and uncertainty. Synchrony believes in the power of diversified index investing, so we offer 3 general implementations for our indices:
Synchrony Indices: These indices are created by the Synchrony team in collaboration with their strategic partners in order to provide customers with a single-click solution to get exposure to the various instruments on the Solana ecosystem. The underlying calculation methodology to each of these indices serve as the foundation for community indices. Some examples of our indices may include: Solana Ecosystem Index (SEI), Raydium Liquidity Pool Index (RAI), The Stable Coin Index (STX), & The Synchrony Composite Index.
Community Indices: These indices are created by the community, for the community, by configuring Synchrony Index Parameters. Each configuration of an index exists as a non-custodial pool for other users to participate in and each pool has an associated token representing proportional ownership of the underlying assets.
Portfolio Indices: In order to have a portfolio that is hands off, investors can use portfolio indices as a means of automated portfolio management. It is completely private, and the configuration of the portfolio is based on what the client wants. The only difference between a portfolio index and a community index is that the portfolio index does not exist as a pool — it does not have an associated token and therefore it is only accessible by that particular user.
Each of Synchrony’s indices are completely configurable, enabling high specificity to execute a variety of strategies. Users can define the parameters for which an asset, or strategy, would be considered a candidate for inclusion into a pool, essentially earmarking a dataset. The index can then be configured by a multitude of options, including but not limited to:
• chosen weighting metrics;
• minimum and maximum weights;
• rebalancing periods;
• deviation thresholds;
• the minimum and maximum number of assets to be returned by the index (10)
Token or strategy whitelisting enables users to specify a dataset they want an index to evaluate. For instance, a user may only wish to evaluate a few of the tokens on the Solana Ecosystem Index instead of the entire index, and weigh them accordingly. This feature enables strategy authors a high degree of specificity and freedom with strategy implementations, without imposing overly restrictive limitations.
Dynamic by Design
As it exists today, most on-chain implementations of an index exist as static weights and static compositions, where rebalancing returns a pool to its initial state. No on-chain implementations of an index-pegged pool enact dynamic compositions, until Synchrony’s inception. Synchrony pool weights are dynamically adjusted to track a proper implementation of an index, and the pool’s composition is also dynamic as the protocol has the authority to add and remove assets from the pool.
Composable, Modular, & Powerful
Each index is instantiated as an index-pegged pool with an accompanying fungible token representing proportional ownership of its underlying assets. Indices can therefore compose, or be composed of, another index’s tokens.
One of the more powerful features of Synchrony’s indices is the ability to index any on-chain instrument. Tokens, liquidity pools, strategies and even indices themselves, are all fair game; there is very little that Synchrony’s suite of indices cannot evaluate. As such, Synchrony’s indices are suitable for a wide range of use-cases, from portfolio management to copy-trading.
We will release the technical details on our Synchrony Composed Indices over the next few weeks as well as more platform teasers and feature reveals.
Also look forward to community based activities, competitions and giveaways, as well as partnership announcements.
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The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Synchrony or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.
All Content in this article is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing in this article constitutes professional and/or financial advice, nor does any information in this article constitute a comprehensive or complete statement of the matters discussed or the law relating thereto.
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