Monday's Lessons
The difficulty of hedging, the risks of option writing, and frozen websites.
The difficulty of hedging, the risks of option writing, and frozen websites.
Rain Delay
This column was advertised as part two of a three-part series, on the merits (or not) of leveraging. That topic will wait. Big stock-market losses usually offer investment lessons, and Monday’s plummet was no exception. It's best to address these issues while the memory is fresh.
Diversify the Hedge!
Managed-futures funds protected beautifully against the 2008 financial crash. Not that retail investors benefited. With one exception, the managed-futures funds that existed at the time were hedge funds, meaning that they weren’t available for the rank-and-file. Too bad. Between late 2007 and early 2009, from the stock market’s peak to trough, the average managed-futures hedge fund gained 12% while stocks dropped 41%.
John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.