Every few months there is a correction that makes one feel like exiting all stock positions in a hurry. Could anyone share how they hedge their stock portfolio against sudden 200-300 point nifty drops that results in a short term sell-off for mid and smallcaps.
If you have the position in futures you can opt for calendar spread strategy and hedging used to minimize the loss and keep the loss in range suppose if u have took nov nifty buy so take another position sell in nifty dec.
Hey, section 11.7 – Hedging a stock Portfolio
My stock+bonds portfolio has given me 15% per annum return on investment. I have designed this portfolio for 12% per annum ROI. But it has outperformed my expectation. Here I have used bonds and cash as secured asset basket with stocks.
FEATURES OF THIS TYPE PORTFOLIO
- LESS TIME FOR MANAGEMENT:
I have just done 5min/month work (on every 21 of month) for execution orders of stocks and bonds. So all over the year, I have spent 1 hr to manage my portfolio.
- EMOTIONAL STABILITY:
I am sleeping like baby every night even with investment in stocks. All portfolio management activities are rule based. All action steps are already known by you before market surprises.
- PROTECTION AGAINST MARKET CRASH
As market rise, your stocks money transferred to Bonds. So when market falls you have most of money in secured basket. In my portfolio I have 60% of my money is in bonds with 10% p.a. interest rate providing me more money to reinvest.
- AUTO-REBALANCE OF STOCK-SECURED ASSET
As you follow rules of investment and withdrawal of money, portfolio automatically rebalances its assets according to market condition.
Disclaimer: 1.Only use money in stock section of portfolio which you don’t need for minimum 8 years. It will grow at 12% annum rate and even more with reinvestment of profit at market crash.
2. This portfolio shows magic after market crash when all are in fear, you got least damage. Your portfolio is ready to grow in recovery after market crash. As investor we all should seek market crash for better return.
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