Three Ways To Hedge The Market
The Dynamic Wealth Report
June 7, 2010
It’s no secret the markets are struggling right now. In the last six
weeks, the markets are down over 10%. It’s the first 10% correction in
over a year.
The markets are highly volatile.
We’ve seen a number of 200 and 300 point daily swings. And who can
forget the 1,000 point mini-meltdown. Investors have needed strong
stomachs (and lots of antacid) recently.
I could go on for pages about why we’re moving lower… but you probably
already know that.
Just pick up a paper and read the front page. Greek and Spain defaulting
on their debts. The Euro plummeting in value. Oil spills destroying the
fishing industry. Even a horrible jobs report. You don’t need me to
rehash the news for you.
All of it adds up to struggling global economic growth.
The uncertainty in the markets has been crushing investor optimism.
Without the greed brought by optimism, all that’s left is fear. Right
now, investors are wondering if we might see another “drop off the
cliff” in the markets.
The potential to hit 6,000 on the Dow is just as good as hitting 14,000…
and that’s a scary thought.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
If we hit 6,000 on the Dow, a lot of investors will be absolutely
wiped-out. Retirements will be postponed. College educations might not
be possible. A vacation home in the mountains or on the beach will
remain only a dream.
To protect their futures, many investors are now looking to hedge their
portfolios.
But how do you do it? That’s a great question.
For those of you who don’t know, hedging a portfolio is a way to protect
your investments against major loss. It’s kind of like buying fire
insurance for your home. You hope you never need it, but you’re glad you
have it. When properly hedged, some money managers can make money in
both up and down markets.
Here’s the challenge. You can make hedging incredibly complex… or you
can keep it simple.
I say why not keep it simple?
Here are three simple things you can do to “hedge” your portfolio today.
First, buy "defensive" investments.
At first glance, this strategy seems too simple. Believe me, it’s quite
powerful. It’s a strategy used by many big money managers. They take
positions in industries able to withstand downturns in the market.
Industries like utilities, food & grocery, or healthcare are all
survivors.
Even if they’re not able to entirely sidestep a market downturn, they at
least hold up better than most others. This is an easy hedging technique
that can be applied at any time.
Those of you experienced with options trading will find the next
strategy useful…
Second, buy put options.
One of the easiest ways to profit from a falling market is by owning put
options. Put options are a lot like insurance. You have to pay a small
premium… but if the market falls, they pay off big.
Put options can soar in value. These profits offset other losses in your
portfolio. Best of all, you can use put options to hedge a single stock
in your portfolio, or the entire market!
If you’re not comfortable trading options, take a look at what’s next…
Third, buy inverse ETFs.
Inverse ETFs are designed to move up in value when a specific basket of
stocks moves lower. It’s an easy way to “short” a market without taking
on all the risks of directly shorting a stock.
For example, the ProShares Short Dow30 (DOG) will rise in value when
the Dow Jones Industrial Average falls. There’s also ProShares Short S&P500 (SH), an inverse ETF for the S&P 500 index. Now it’s easier than ever
to hedge your portfolio in one trade.
What to do now?
Right now we’re seeing a correction in the markets. Investors who hedged
their portfolios are sleeping better than those who didn’t.
Remember, these aren’t techniques to become a millionaire from a falling
market. Hedging is about protecting your long investments.
Most importantly, investors implementing a proper hedging strategy will
avoid the worst case scenario… a catastrophic loss. Are you willing to
roll the dice on your futures? If not, take some time now to protect
your portfolio with a sound hedging strategy.
• Travel & Tourism Industry (Down 22.3%)
Despite growing investor confidence, the travel & tourism industry has
been taking it on the chin. Industry leaders like Priceline (PCLN) and
Orbitz (OWW) have been leading the markets lower and are down more than
20% each. If you ask me, a weak Euro makes it a great time to travel to
Europe.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map