When it comes to protecting your portfolio during uncertain market conditions, what should your strategy be? Should you jump on the things trending in the market? Should you panic and sell everything? How should you hedge your portfolio? While everyone’s investment strategy is different, Zack Shepard shared his strategy during an appearance on After The Bell, airing on the Fox Business Channel, and talked about ways to hedge a portfolio.
According to Shepard, if someone wants to hedge their stock bets, instead of investing in a hedge fund, they may want to consider hedging with short term, high-quality fixed income. Making bets on long term maturities and fixed income may not be the best idea, because investors can feel the negative impact of interest rates when they begin to shift, which creates the risk of losing money.
Shepard goes on to explain that he and Mark Matson rely on a strategy that involves staying globally diversified in over 12,000 companies all over the world. This allows investors to hedge their investments intrinsically. In addition, Matson Money then rebalances portfolios during market highs and the lows. One of the key principles in the investment strategy behind the Matson Money team is to always have a globally diversified portfolio and to avoid chasing the hot and trending picks in the market. Maintaining a balanced portfolio during uncertain times in the market is a form of hedging, and after all, no one can predict where the market will go.
Take for example the current state of the Chinese economy. On July 27, 2015, CNN Money published an article suggesting that China’s economic turbulence could impact other economies around the world, like the US. However, Matson Money believes that investors with globally diversified portfolios have the ability to rebalance in the event that a particular market experiences a decline. While the status of China’s economy is all over the media, investors should remain calm. Panic creates the potential of making bad decisions in the market. As always, every investor has a different strategy and past performance is no guarantee of future results.