Other Hedging Strategies
Inverse ETFs are not for everyone and there are other hedging options available in the “Do It Yourself” playbook. We highlight a few types because we think that each can be valuable. They include short selling stocks, buying protective put options and managed futures. Like all hedging strategies, they are not without there own flaws.
There are also more subtle strategies to de-risk your portfolio. These include sector rotation into defensive stocks, alternative ETFs and raising cash. Whichever option you select is a prudent choice if you expect further market declines.
The main problem with some of these other hedging strategies is timing. You can be correct in your thesis but wrong on the timing. So if you don’t want to be tied to your computer screen, sweating out the undulations of the market, consider placing a portion of your money with a professional manager well-versed in making money in both bull and bear markets. Many of these firms will employ the aforementioned strategies and will be able to manage them on a full-time basis. You can always get some information to see if it makes sense for your financial situation. So that is yet another option to consider.
- Short Selling Stocks
- Protective Put Options
- Managed Futures