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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Jeffrey D who wrote (9993)11/20/1999 6:19:00 PM
From: MrGreenJeans   of 15132
 
Jeff

If you believe in Bob's 4% max. on individual stocks you are hedging.

Hedging individual specific stock risk-I agree.

If you have a diversified portfolio you are hedging.

Absolutley Not. If you have a diversified portfolio of stocks or bonds or a combination of the two you are not as diversified as you may think. Read about cross correlations between different stocks (even between countries), bonds or the combination of the two and you may find that in major moves they all move in similar directions. Morgan Stanley has published reports on cross correlation effects over the years.

If you don't trade on margin you are hedging.

I disagree here as well. You may be taking on less risk by not having margin but I would not consider that a hedge. Further, I can use margin to short futures such as various stock indexes against my long positions and have a hedge.
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