There are many, many ways to hedge. However, when you get into the various hedging options, they perform differently and work or don’t work so well depending on what thing or combination of things is going on. To use an analogy, we do not have one medicine that fixes “sick”, we have many that target sicknesses.

One thing is fairly clear. If you want to keep it simple and narrow down to just stock/index options (e.g. puts) or cash, then it’s better to simply lighten up your equity and have more cash. Puts are very expensive insurance.

The other thing that is near certain, hedging is usually just a tradeoff. Less return for less drawdown.

If you are interested in hedging possibilities in an accessible fashion Google Random Roger’s Blogspot. It is an interesting site to read. I don’t invest in most of what one can read about there, but there have been a couple of useful ideas that I would never have thought of.

Retirement Investing FAQ

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