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Strategies & Market Trends : Dividend investing for retirement
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To: stock bull who wrote (5574)8/30/2010 11:07:05 AM
From: Bread Upon The Water  Read Replies (1) of 34328
 
The answer for me is this regard is to hedge--by buying double inverse index funds that go up when the general market tanks.

I regard the price of the funds as capital preservation insurance. If the market does tank you will have preserved any where from some to a great deal of your capital and would be in a position to bargain hunt.

For instance, the Pro Share Ultra Finance double Inverse ETF (SKF) (now selling for around 22) achieved a price of of around $300 a share in March of 2008 (the darkest days of the bear).

People here are not enamored of this idea. They'll tell you:

1. The indexes are not perfectly correlated (True)

2. You can achieve the same thing by keeping a cash reserve (Not True---you will have cash to bargain hunt but you will not have preserved your capital)

So for me hedging is just the cost of doing business and having peace of mind--and if the the unthinkable happens-- putting oneself in a position to profit from the carnage.
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