Aug 23, 2018
Welcome to the Broken Pie Chart Podcast Episode 4 Hedged Equity and Protective Investment Strategies. This week host Derek Moore , author of Broken Pie Chart, is once again joined by Jay Pestrichelli of ZEGA Financial and author of Buy and Hedge. Investors often miss out because of staying un-invested for fear of large market drawdowns or try to pick the absolute market top and sell too early. Derek and Jay have a lively discussion around what exactly strategies that hedge downside risk are and how they may solve some dilemmas for investors. They also examine how the trick is shifting equity risk for more short duration fixed income risk while keeping the cost of downside protection low. Later they discuss how investors often want insurance at the very worst times when it costs the most while shunning the idea for protective strategies when they are the cheapest to put on. Learn how investors can look to have the goal of capturing much of the upside in markets while eliminating most of the downside.
Key Takeaways:
- • What are hedged equity strategies?
- • How do investment strategies protect the downside in portfolios?
- • Why do investors suffer from fear and greed?
- • Why simply getting long equities and buying puts is only half the story.
- • Derek Moore highlights parts of the book Buy and Hedge explaining who hedges work in portfolios
- • Jay Pestrichelli elaborates on the crafty change from Buy and Hold to Buy and Hedge
- • Are bonds and thus the old 60/40 portfolios a thing of the past?
- • Why investors within 10-20 years of retirement might need more growth that they think
- • When markets sell off substantially, it all goes down
- • Derek Moore elaborates on the chapter Why Diversification Fails from his book Broken Pie Chart
- • Later Jay and Derek discuss various approaches which offer only soft hedges and floors rather than hard floors.
- • Finally, they tease a future episode with a short introduction to providing downside buffers in portfolio strategies
Mentioned in this Episode:
Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk
Buy and Hedge Book by Jay Pestrichelli and Wayne Ferbert https://amzn.to/2P3gw17