RISKS MANAGEMENT:
QUOTE:-
1) “The Essence of Investment Management is the Management of Risks, not the Management of Returns”, Benjamin Graham.
2) “Therefore Proper Allocation of Assets and Entry Level are the 2 most crucial actions.
Nothing you can do is better to Control Risks and Generate profit,” Dick Davis.
Unquote:-
In stocks investment, there are so many different types of Risks to note, to consider, to hedge. i have been investing for +23 years, i am very ashamed to say, "Till today i still don't know how to hedge my portfolio against a sudden Bear Market Attack. Especially during the time when my portfolio is enjoying a Bull Market Run".
Please fellow forumers, can you share how many ways you can hedge your portfolio against a Bear Market Attack? And what is the appropriate % of hedging.
And can these recommended hedging instruments i came across really works? i suspect during a Bear Market Attack, these instruments will have liquidity problem - A lot of sellers and no buyers.
These recommended hedging instruments are:-
1)SDS - ProShares UltraShort S&P 500 ETF (A double short on the S&P 500)
2)SPXU -ProShares UltraProShort S&P 500 ETF (A triple short on S&P 500)
The above 2 ETFs are recommended for people like me to help me sleep better at night who don't know how to play shorting the markets or how to use "put or call" option for hedging.
Please fellow forumers, share all your hedging ideas for protecting portfolio from Bear Market Attack. So that everyone here can benefit.
Thanks.
NB:
Though my stocks portfolio is only from SGX, not 100% correlated to S&P 500, nevertheless SGX's STI track S&P 500 quite closely. i think at least > 80-90 %.
I remember reading an article in this forum (it was an interview with 'Seth A. Klarman' by Jason Zweig) and it has a quote below that had me thinking, that i would like to share again:
Investors need to pick their poison: Either
make more money when times are good and have
a really ugly year every so often, or protect on the
downside and don’t be at the party so long when
things are good
Hi weijian,
That's exactly the matter. In a Bull Market, we would like to party a bit longer if we know how to hedge. Without hedging mechanism, we are very afraid of the sudden appearance of the Bear (usually trigger by the Black Swan). As a result, we usually exit the Bull Market earlier than "necessary" - your quotation says it all:- (protect on the downside and don’t be at the party so/{too} long when things are good).
I believe for retail investors, the hedge against a bear market is not so much about shorting the market or buying puts/short ETFs. It is more about asset reallocation, putting more of your portfolio into bonds/fix-income instruments than equity as a hedge, as bonds/fix-income instruments often tend to perform better than equity during bear market.
Completely agree with you about asset allocation. But don't we all want to party a bit longer in a Bull Market and milking the cows in the field a little bit more if we think we can protect our "backside" when the sudden Bear appears?
(26-12-2011, 05:21 PM)Temperament Wrote: [ -> ]Completely agree with you about asset allocation. But don't we all want to party a bit longer in a Bull Market and milking the cows in the field a little bit more if we think we can protect our "backside" when the sudden Bear appears?
that's called GREED, not risk management.
risk management often will result you earning less but suffering less as well.
(26-12-2011, 05:25 PM)freedom Wrote: [ -> ] (26-12-2011, 05:21 PM)Temperament Wrote: [ -> ]Completely agree with you about asset allocation. But don't we all want to party a bit longer in a Bull Market and milking the cows in the field a little bit more if we think we can protect our "backside" when the sudden Bear appears?
that's called GREED, not risk management.
risk management often will result you earning less but suffering less as well.
i think you are correct and wrong at the same time.
Why?
It's greed when your hedge doesn't work to your advantage.
If it works then you have upgrade your investing skill.
Anyway why are we doing asset allocation or re-asset allocation of our complete portfolio?
It's actually a hedging action.
In other words, in all types of investments we must always use hedging one way or another.
If not our entire portfolio really can be wiped out at one "swipe".
(26-12-2011, 05:42 PM)Temperament Wrote: [ -> ] (26-12-2011, 05:25 PM)freedom Wrote: [ -> ] (26-12-2011, 05:21 PM)Temperament Wrote: [ -> ]Completely agree with you about asset allocation. But don't we all want to party a bit longer in a Bull Market and milking the cows in the field a little bit more if we think we can protect our "backside" when the sudden Bear appears?
that's called GREED, not risk management.
risk management often will result you earning less but suffering less as well.
i think you are correct and wrong at the same time.
Why?
It's greed when your hedge doesn't work to your advantage.
If it works then you have upgrade your investing skill.
Anyway why are we doing asset allocation or re-asset allocation of our complete portfolio?
It's actually a hedging action.
In other words, in all types of investments we must always use hedging one way or another.
If not our entire portfolio really can be wiped out at one "swipe".
if you were so confident that you could milk the cow a little bit more, and you did it, I would say that there would be no risk to hedge. therefore, there is no point for risk management. No risk, where will we get risk management.
(26-12-2011, 08:32 PM)freedom Wrote: [ -> ] (26-12-2011, 05:42 PM)Temperament Wrote: [ -> ] (26-12-2011, 05:25 PM)freedom Wrote: [ -> ] (26-12-2011, 05:21 PM)Temperament Wrote: [ -> ]Completely agree with you about asset allocation. But don't we all want to party a bit longer in a Bull Market and milking the cows in the field a little bit more if we think we can protect our "backside" when the sudden Bear appears?
that's called GREED, not risk management.
risk management often will result you earning less but suffering less as well.
i think you are correct and wrong at the same time.
Why?
It's greed when your hedge doesn't work to your advantage.
If it works then you have upgrade your investing skill.
Anyway why are we doing asset allocation or re-asset allocation of our complete portfolio?
It's actually a hedging action.
In other words, in all types of investments we must always use hedging one way or another.
If not our entire portfolio really can be wiped out at one "swipe".
if you were so confident that you could milk the cow a little bit more, and you did it, I would say that there would be no risk to hedge. therefore, there is no point for risk management. No risk, where will we get risk management.
Exactly, if no risk why need to hedge? Like i say it again, "In investment, there is no 100% sure thing, therefore we need to hedge. Therefore there is a market for hedging products . Only hedging is not easy to undertake or even understand. Anyway it's O. K. if hedging is not a form of risk management to you. Everyone is entitle to his own thinking.
Please be reminded i said i am very ashamed of myself i don't know how to hedge for 23 years of investing;
And i have no confidence at all about hedging and not like what you said to quote you:- "if you were so confident that you could milk the cow a little bit more, and you did it, I would say that there would be no risk to hedge."
Again i say, "It's O. K. you are entitle to your own thinking". We don,t have to carry on discussing about hedging as we already quite clear about our positions. We see it differently.
Actually i need someone to share with me more about hedging not, not there is no need to hedge.
Anyway thank you for your opinion. Hedging is greed to you if i did not misunderstand you. . i understand we are different. Hedging to me is a great skill to learn. And often not so easy to understand. And even harder to master.
It's O. K. we have different understanding of hedging here. We don't have to proceed further on this idea.
Cheers!
(26-12-2011, 10:24 PM)Temperament Wrote: [ -> ] (26-12-2011, 08:32 PM)freedom Wrote: [ -> ] (26-12-2011, 05:42 PM)Temperament Wrote: [ -> ] (26-12-2011, 05:25 PM)freedom Wrote: [ -> ] (26-12-2011, 05:21 PM)Temperament Wrote: [ -> ]Completely agree with you about asset allocation. But don't we all want to party a bit longer in a Bull Market and milking the cows in the field a little bit more if we think we can protect our "backside" when the sudden Bear appears?
that's called GREED, not risk management.
risk management often will result you earning less but suffering less as well.
i think you are correct and wrong at the same time.
Why?
It's greed when your hedge doesn't work to your advantage.
If it works then you have upgrade your investing skill.
Anyway why are we doing asset allocation or re-asset allocation of our complete portfolio?
It's actually a hedging action.
In other words, in all types of investments we must always use hedging one way or another.
If not our entire portfolio really can be wiped out at one "swipe".
if you were so confident that you could milk the cow a little bit more, and you did it, I would say that there would be no risk to hedge. therefore, there is no point for risk management. No risk, where will we get risk management.
Exactly, if no risk why need to hedge? Like i say it again, "In investment, there is no 100% sure thing, therefore we need to hedge. Therefore there is a market for hedging products . Only hedging is not easy to undertake or even understand. Anyway it's O. K. if hedging is not a form of risk management to you. Everyone is entitle to his own thinking.
Please be reminded i said i am very ashamed of myself i don't know how to hedge for 23 years of investing; And i have no confidence at all about hedging and not like what you said to quote you:- "if you were so confident that you could milk the cow a little bit more, and you did it, I would say that there would be no risk to hedge."
Again i say, "It's O. K. you are entitle to your own thinking". We don,t have to carry on discussing about hedging as we already quite clear about our positions. We see it differently.
Actually i need someone to share with me more about hedging not, not there is no need to hedge.
Anyway thank you for your opinion. Hedging is greed to you if i did not misunderstand you. . i understand we are different. Hedging to me is a great skill to learn. And often not so easy to understand. And even harder to master. It's O. K. we have different understanding of hedging here. We don't have to proceed further on this idea.
Cheers!
I am sure you misunderstood me all the way. like what you said
It's O. K. you are entitle to your own thinking. I rest my case.