Comments on: Hedge Against Your 401k http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/ Personal Finance and Investing Wed, 25 Jan 2012 05:41:36 +0000 hourly 1 http://wordpress.org/?v=3.1.1 By: Matunos http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/comment-page-1/#comment-1164 Matunos Mon, 03 Oct 2011 08:49:09 +0000 http://www.nakedhedgefund.com/?p=330#comment-1164 Oh, one more thing: you didn't take into account the tax considerations of the gain in SH (unless your "hedging" account was another tax-deferred account). Even assuming you've held it for a year, the government's going to take 15% of that $7,000. Holding cash is looking even more attractive. ;-) Oh, one more thing: you didn’t take into account the tax considerations of the gain in SH (unless your “hedging” account was another tax-deferred account). Even assuming you’ve held it for a year, the government’s going to take 15% of that $7,000. Holding cash is looking even more attractive. ;-)

]]> By: Matunos http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/comment-page-1/#comment-1163 Matunos Mon, 03 Oct 2011 08:30:13 +0000 http://www.nakedhedgefund.com/?p=330#comment-1163 What you have described above is not hedging, because in your scenario, the investor got completely out of the S&P fund. Thus, purchasing the short ETF is not a hedge against anything; it's just a speculative play. If you truly want to hedge, you would stay in the S&P fund and purchase (or sell) an instrument to limit your losses, probably options. Going long a short ETF like SH would just neutralize that amount in your S&P (minus commissions and fees); might as well get some interest rate off of it instead. Hedging should be cheaper than getting out and back into your underlying position, or else you'd just do that. But the principle remains: if you're out to make money on a drop rather than protect it, you're not hedging. What you have described above is not hedging, because in your scenario, the investor got completely out of the S&P fund. Thus, purchasing the short ETF is not a hedge against anything; it’s just a speculative play.

If you truly want to hedge, you would stay in the S&P fund and purchase (or sell) an instrument to limit your losses, probably options. Going long a short ETF like SH would just neutralize that amount in your S&P (minus commissions and fees); might as well get some interest rate off of it instead. Hedging should be cheaper than getting out and back into your underlying position, or else you’d just do that. But the principle remains: if you’re out to make money on a drop rather than protect it, you’re not hedging.

]]> By: NHF http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/comment-page-1/#comment-1155 NHF Tue, 26 Apr 2011 06:25:51 +0000 http://www.nakedhedgefund.com/?p=330#comment-1155 Rick, This scenario is to show the option people have when a market is in a bear market and is going down. Most people are trained to think that they don't have any options and they have to go down with the ship. Hedging can save your nest egg. There is timing involved, but you would be buying SPY instead of SH if the market is in an uptrend. To keep things simple a lot of people hedge when the S&P is below the 200 day moving average and are fully long when its above the 200 moving average. Rick,
This scenario is to show the option people have when a market is in a bear market and is going down. Most people are trained to think that they don’t have any options and they have to go down with the ship. Hedging can save your nest egg.
There is timing involved, but you would be buying SPY instead of SH if the market is in an uptrend. To keep things simple a lot of people hedge when the S&P is below the 200 day moving average and are fully long when its above the 200 moving average.

]]> By: Rick http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/comment-page-1/#comment-1153 Rick Wed, 26 Jan 2011 18:48:51 +0000 http://www.nakedhedgefund.com/?p=330#comment-1153 Your scenario above assumes that the S&P declines 35%. What would have happened to the value of your ETF if the S&P would have instead gone up 35%? Your scenario above assumes that the S&P declines 35%. What would have happened to the value of your ETF if the S&P would have instead gone up 35%?

]]> By: Loss Decade | Naked Hedge Fund http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/comment-page-1/#comment-610 Loss Decade | Naked Hedge Fund Tue, 24 Nov 2009 16:52:53 +0000 http://www.nakedhedgefund.com/?p=330#comment-610 [...] http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/ [...] [...] http://www.nakedhedgefund.com/finance/hedge-against-your-401k-2/ [...]

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