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Hodson: 5 Ways to Protect Your Investments From Stock-Market Decline

Hodson: 5 Ways to Protect Your Investments From Stock-Market Decline

By    |   Tuesday, 29 September 2015 06:00 AM

Investors can take steps to protect the value of their investments as stocks erase an entire year of gains amid slowing global growth.

Peter Hodson, CEO of 5i Research Inc., has five suggestions on ways to guard against volatility.

“Ignoring market volatility and handling market crashes are two of the toughest things investors have to face,” he writes in the Financial Post. “There are a number of reactive strategies to handle them, but it’s probably better to take a proactive approach.”

5 Ways to Protect a Portfolio
  1. Sell call options: “You can add extra income by selling call options — the obligation to sell your stock at a certain price — on some of the securities you own.”
  2. Buy alternative assets: “Look for a fund that had a positive return in August, when markets were horrible.” Other possibilities are fine art, gold coins, real estate or other securities.
  3. Invest in cash-rich companies: “Cash-rich companies should in most cases be far less volatile than the market in general.”
  4. Buy put options: A put option allows an investor to sell a security at a set price, but it can be an expensive form of insurance. “We do not recommend put options, but it is a protective strategy that is available.”
  5. Short sell: “The riskiest strategy, and certainly not for everyone.”
     
As with any investment portfolio, it is important to be diversified and not rely on a single strategy, Hodson says.
 
Fund managers are bracing for a recession as they pull money out of emerging markets like China and seek the safety of cash and bonds, according to Bank of America Merrill Lynch.
 
The bank’s monthly survey found that the percentage of investment professionals who were weighted toward stocks fell from 41 percent in August to 17 percent this month, the lowest in three years. Fund managers also had the worst expectations for global economic growth in five years.

That kind of widespread gloom may point to an economic slowdown — or conversely, be a contrarian set-up for stock-market gains, said Michael Hartnett, chief investment strategist at BofA.

“Unambiguous pessimism means risk assets riper for a rally,” he said in a report obtained by Newsmax Finance. “If no rally, then markets ominously hinting ‘recession’ and/or ‘default' imminent.”

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Investors can take steps to protect the value of their investments as stocks erase an entire year of gains amid slowing global growth. Peter Hodson, CEO of 5i Research Inc., has five suggestions on ways to guard against volatility.
investment, portfolio, protection, market
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2015-00-29
Tuesday, 29 September 2015 06:00 AM
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