Follow-up on Hedging
On April 9th
I posted a piece on how I was hedging my investment portfolio to manage my risk
in the market place. I had bought an ETF on the NYSE (RWM) that shorts the
Russell 2000 about two weeks before I wrote that post.
I am now down just
over 11 percent on that investment. In hindsight I regret making that move as
it has cost me money in the in term. However at the time I didn’t have the benefit
of hindsight. I was facing an unknowable future and felt that risk was elevated
in the marketplace. Looking back I now feel I put it on a little early.
So what do I do
now? My feeling is that the underlying market is continuing to weaken under the
surface of the market indexes. Market tops are like that. They can continue to
go up, caught up in their own momentum and mathematics.The underlying breadth of the market (momentum of breadth) is weakening even as the major indexes continue their upward move. There is also some market rotation going on as the big money shifts its positions around. I'm going to hold on to my short for now and re-evaluate later on down the road.
This is typical of the type of decisions an investor will have to make. Faced with the uncertainty of an unknowable future he will have to make a determination as of what to do based on the present market environment. If his decision doesn't work out, he shouldn't beat himself up over it. Its just part of the game of investing and dealing with a future where anything can happen. Right now my 'short' is still a 'work in progress'. As I feel the market continues to weaken I will hold on to my short and wait. Learning how to wait is a big part of investing.
No comments:
Post a Comment