Highlights books related to the week's top financial news stories, by Karris Golden, president & COO of Wasendorf & Associates (Traders Press Inc., W&A Publishing and SFO Magazine)
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The S&P 500 has experienced 16 violent declines in the past 18 years. Ouch.
Professional and institutional investors weather those upsets by using hedging techniques, according to authors Jay Pesterichelli and Wayne Ferbert. In Buy and Hold Hedge: The 5 Iron Rules for Investing over the Long Term, the investment experts outline ways to use hedging as part of a long-term plan for growing and preserving portfolio assets.
“The (2008) market crash was precipitous and calamitous,” they write. “Think about the investment decisions you faced with your portfolio.”
Did you “curl into the fetal position and hope it would all go away”? Blame your investment adviser and demand results? Sell everything? Look for tax advantages among your investing losses?
“(O)f these four actions, the only one that was even modestly productive was the last one,” Pestrichelli and Ferbert explain. “At least the investor who looked for tax efficiency from the losses might have saved himself a bit of money. But it’s hard to save on taxes when you don’t have any gains to offset the losses. You can at least admire the person who tried to find tax efficiency for his ’glass half-full’ attitude.
Pestrichelli and Ferbert co-founded ZEGA Financial LLC, where they are the principals. Pestrichelli has 20 years of experience in business management, with 12 years in the online brokerage field. Ferbert has been in financial services for 18 years and 10 years in the online brokerage field.
The book begins by introducing the concept of hedging as it relates to financial markets, explaining risk-and-return decisions, psychology and other considerations. It goes on to cover investing laws, the rules of buy and hedge, the basics of hedging and advanced tactics.
In all, the book is a good, basic primer for anyone who wants to understand how buy and hedge works, simply ways investors can hedge their portfolios and common mistakes individual investors make.
“Maintaining a long-term outlook for your investments is a key success factor in a Buy and Hedge portfolio,” Pesterichelli and Ferbert write. “However, we could easily rewrite this rule as ‘Avoid having a short-term outlook.’ The reality is that the benefits of a long-term outlook are as powerful as the problems resulting from a short-term outlook. Let’s start by examining the destructive powers of a short-term outlook and then return to the advantages of a long-term outlook.”
Buy and Hold Hedgeisn’t strictly for full-time money managers—or those who want to become one. Instead, the bookcan be useful to anyone willing to educate him or herself using its straightforward easy to understand distilling of sophisticated investing techniques.
Purchase Buy and Hold Hedgetoday and use my blog code, KGBLOG0112 to receive 20% off the cover price, plus free U.S. S&H.*
According to the Associated Press, Forbes, and Bloomberg Businessweek, G.E., Bank of America Corp., Citigroup Inc., Caterpillar Inc. and Alcoa Inc. were among those that increased 1% or more on Wednesday, following a rally in European lenders.
Greek, German and French leaders will meet today to discuss ways to contain Greece’s debt crisis. Speculators believe China may be willing to buy the bonds of nations hit by the debt crises, as reported by Businessweek.
Not everyone supports such a plan, according to the English-language Caijing magazine. Some advisers to China’s central bank believe the nation’s willingness to purchase euro bonds is little more than an ill-advised “bleeding heart” response to the global debt crisis.
“What today’s world needs is not a ‘bleeding heart’; instead, it needs investors with a senseo fo reform and cooperation,” Li Daokuu, academic adviser to the central bank, told Caijing. “I believe (China) will perform a role of a real good guy rather than a ‘bleeding heart.’”
In the article, he advises diversification of China’s foreign exchange reserves with solid investments.
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These and other stories are enough to leave even the calmest feeling a bit rattled.
This morning while getting my oil changed, I was annoyed by a waiting room companion who was watching the news. The guy had the nerve to give me a conspiratorial wink and say, “Well, at least things can’t get any worse.”
As he was an elderly gentleman, I refrained from asking if he remembered the Great Depression.
A solid plan is the best course for individual traders and investors. I know I make better decisions when I’m armed with as much information as possible.
Information also puts me at ease. Even if a problem is big, bad and beyond my control, getting reading information from a trusted, reputable source, helps me feel like I have a handle on the “why,” “how” and “what next” of a situation.
This month’s SFO (Stocks, Futures, Options) magazine offers “Stop Chasing Trades: The 10-Week Average Can Help.” In the article, RealMoney columnist Kate Stalter explains the ins and outs of using 10-week moving average—a “key benchmark professional investors monitor.”
“When professional investors … have ownership in a particular stock, they’ll often swoop in to grab more shares at a lower price when they see a pullback,” Stalter writes. “Because they presumably have confidence that the stock has more room to run higher, the strategy makes sense. Individual investors can watch this support as it is unfolding and follow in the pros footsteps.”
If you’re interested in utilizing the strategies Stalter explains, were do you begin?
Traders Press offers a variety of resources on Economic and Technical indicators. Use the promotional code KGBLOG711 and receive 20% off your purchase plus free U.S. S&H* until midnight CDT tonight. (It will then revert to the regular 10% off plus free U.S. S&H* discount I usually offer.)
It’s no secret that the other Traders Pressbloggers and I are in a promotional code contest, and it’s no surprise I’m winning!
As I mentioned previously, the discount is currently 20% off—double that which we normally offer on all purchases at TradersPress.com, plus free U.S. S&H.* Just use promo code KGBLOG711 to save! (Yeah, you’ll get 20% off using the other bloggers’ codes, too.) In addition and as always, you’ll earn your rewards points, which adds up to savings on future purchases!
*Some restrictions apply. Shipping is free to residents in the continental United States. International shipping charges will be applied at our regular shipping rates.