Displaying items by tag: hedging
These ETFs Can Hedge Market Volatility
(New York)
Volatility hasn’t been on almost anyone's minds for most of 2021, but…see the full story on our partner Magnifi’s site.
Find the Right Gold Stocks for Your Portfolio
(New York)
Many investors want gold exposure without holding any of the precious metals directly. Some have gone the route…see the full story on our partner Magnifi’s site
How to Hedge Against Rate Risk
(New York)
Yields have been moving all over the place. And while there are daily moves higher or lower, there is a definitive bias towards sharp moves upward. Accordingly, investors need to be thinking about rate hedging. Investors are in a tough place as Treasury yield rises have been causing losses, but the bonds themselves still don’t have high enough yields to be attractive. With that in mind, there are a couple ways investors can go about protecting themselves. Firstly, they can buy floating rate bond-focused ETFs, which give protection but have very low yields. The other opportunity is to buy into bond funds that access riskier corners of the markets, where yields are much higher and durations are shorter, giving less rate sensitivity.
FINSUM: Our favorite ETFs for this purpose are from ProShares, specifically IGHG, which hedges rate risk but still offers the yield income.
ETFs That Guarantee to Limit Your Losses
(New York)
Have you ever thought to yourself “I would love if they could put the downside protection of structured products into an ETF”? Probably not, but someone did, as there is a new category of ETFs, called Buffer ETFs, which are seeing big capital inflows. The ETFs work by guaranteeing only a certain level of losses in exchange for limiting potential gains. The ETFs have a year-long term, and their details change constantly. But a good example would be one with a 9% “buffer”. This means that if the ETF loses 12% in the year, the holder would only see a 3% loss and the product provider would absorb the rest. The first and only provider of these ETFs is called Innovator and has partnered with MSCI, Nasdaq and more to create a handful of exchange traded funds. Check out KOCT, NOCT, EJUL, and IJUL.
FINSUM: These are very tricky ETFs, just like the structured products from which they drew their inspiration. That said, they seem like they have some utility if they are executed properly.
The Best Strategy to Handle All This Volatility
(New York)
The market has been very up and down lately. 50 bp losses or gains in a day feel pretty standard by now. But all of that may be wreaking havoc on investors’ nerves and portfolios. So what is the best way to hedge against the volatility? Most low volatility funds invest in stocks with a low beta, or those that change little compared to market movements. However, there may be an even better way to go about hedging. AGF has an ETF call BTAL, which not only buys low beta names, but also shorts high beta ones, all in equal weight with equal sector balance. In bouts of volatility, those shorts tend to really help gains in a way that holding long-only positions does not.
FINSUM: This seems like a smart approach that gives a sophisticated level of protection to investors. Worth a look.