I don't know what specific strategy your financial adviser is using to minimize market fluctuations, but I would say he basically has two options:
Reduce your exposure to the stock market or hedge against those market fluctuations.
Let's say he chooses to
reduce your exposure to the stock market.
Unless we observe a rather swift improvement in market internals and a further, material easing in credit spreads — neither which would relieve the present overvaluation of the market, but both which would defer our immediate concerns about downside risk — the present moment likely represents the best opportunity to
reduce exposure to stock market risk that investors are likely to encounter in the coming 8 years.
Not exact matches
Important factors that could cause actual results
to differ materially from those reflected in such forward - looking statements and that should be considered in evaluating our outlook include, but are not limited
to, the following: 1) our ability
to continue
to grow our business and execute our growth strategy, including the timing, execution, and profitability of new and maturing programs; 2) our ability
to perform our obligations under our new and maturing commercial, business aircraft, and military development programs, and the related recurring production; 3) our ability
to accurately estimate and manage performance, cost, and revenue under our contracts, including our ability
to achieve certain cost reductions with respect
to the B787 program; 4) margin pressures and the potential for additional forward losses on new and maturing programs; 5) our ability
to accommodate, and the cost of accommodating, announced increases in the build rates of certain aircraft; 6) the effect on aircraft demand and build rates of changing customer preferences for business aircraft, including the effect of global economic conditions on the business aircraft
market and expanding conflicts or political unrest in the Middle East or Asia; 7) customer cancellations or deferrals as a result of global economic uncertainty or otherwise; 8) the effect of economic conditions in the industries and
markets in which we operate in the U.S. and globally and any changes therein, including fluctuations in foreign currency exchange rates; 9) the success and timely execution of key milestones such as the receipt of necessary regulatory approvals, including our ability
to obtain in a timely fashion any required regulatory or other third party approvals for the consummation of our announced acquisition of Asco, and customer adherence
to their announced schedules; 10) our ability
to successfully negotiate, or re-negotiate, future pricing under our supply agreements with Boeing and our other customers; 11) our ability
to enter into profitable supply arrangements with additional customers; 12) the ability of all parties
to satisfy their performance requirements under existing supply contracts with our two major customers, Boeing and Airbus, and other customers, and the risk of nonpayment by such customers; 13) any adverse impact on Boeing's and Airbus» production of aircraft resulting from cancellations, deferrals, or
reduced orders by their customers or from labor disputes, domestic or international hostilities, or acts of terrorism; 14) any adverse impact on the demand for air travel or our operations from the outbreak of diseases or epidemic or pandemic outbreaks; 15) our ability
to avoid or recover from cyber-based or other security attacks, information technology failures, or other disruptions; 16) returns on pension plan assets and the impact of future discount rate changes on pension obligations; 17) our ability
to borrow additional funds or refinance debt, including our ability
to obtain the debt
to finance the purchase price for our announced acquisition of Asco on favorable terms or at all; 18) competition from commercial aerospace original equipment manufacturers and other aerostructures suppliers; 19) the effect of governmental laws, such as U.S. export control laws and U.S. and foreign anti-bribery laws such as the Foreign Corrupt Practices Act and the United Kingdom Bribery Act, and environmental laws and agency regulations, both in the U.S. and abroad; 20) the effect of changes in tax law, such as the effect of The Tax Cuts and Jobs Act (the «TCJA») that was enacted on December 22, 2017, and changes
to the interpretations of or guidance related thereto, and the Company's ability
to accurately calculate and estimate the effect of such changes; 21) any reduction in our credit ratings; 22) our dependence on our suppliers, as well as the cost and availability of raw materials and purchased components; 23) our ability
to recruit and retain a critical mass of highly - skilled employees and our relationships with the unions representing many of our employees; 24) spending by the U.S. and other governments on defense; 25) the possibility that our cash flows and our credit facility may not be adequate for our additional capital needs or for payment of interest on, and principal of, our indebtedness; 26) our
exposure under our revolving credit facility
to higher interest payments should interest rates increase substantially; 27) the effectiveness of any interest rate hedging programs; 28) the effectiveness of our internal control over financial reporting; 29) the outcome or impact of ongoing or future litigation, claims, and regulatory actions; 30)
exposure to potential product liability and warranty claims; 31) our ability
to effectively assess, manage and integrate acquisitions that we pursue, including our ability
to successfully integrate the Asco business and generate synergies and other cost savings; 32) our ability
to consummate our announced acquisition of Asco in a timely matter while avoiding any unexpected costs, charges, expenses, adverse changes
to business relationships and other business disruptions for ourselves and Asco as a result of the acquisition; 33) our ability
to continue selling certain receivables through our supplier financing program; 34) the risks of doing business internationally, including fluctuations in foreign current exchange rates, impositions of tariffs or embargoes, compliance with foreign laws, and domestic and foreign government policies; and 35) our ability
to complete the proposed accelerated
stock repurchase plan, among other things.
We still have some
exposure to «basis risk» - the risk that our
stocks perform differently than the indices we use
to hedge, but given that both the broad
market and some of our industry group holdings are oversold relative
to the S&P 100, I believe that the some of this potential for basis risk was
reduced by the recent decline.
Although our nightly swing trading newsletter is basically a dynamic service that generates specific
stock and ETF trade ideas, the main goal of our trading system is
to aggressively trade the best technical trade setups when conditions are ideal, but also be ready and able
to quickly and cut back
market exposure by
reducing position size on new trades (or simply not trading at all) when
market conditions deteriorate.
Because of the yen's propensity
to move in the opposite direction of the domestic
stock market, unhedged
exposure to the country may
reduce volatility.
As the target date approaches and passes, the mix becomes more conservative, with the manager slowly
reducing the portfolio's
exposure to stocks in favor of bonds and money
market investments.
So, we sold some
stocks in our retirement accounts and
reduced our
stock market exposure to 45 % of our net worth (not
to be confused with portfolio allocation).
It steadily
reduces your
exposure to risky equities
to reflect how you've ever less time left
to recover from
stock market falls.
When the
market is reaching for 90 % of the previous record high
reduce your
exposure to stock by 30 - 40 %.
For retirees looking
to protect their nest eggs from
market volatility, research indicates that instead of
reducing your
exposure to stocks you would be better off increasing it.
Some investors
reduce exposure to these risks by allocating only a small percentage of their portfolio
to emerging -
market stocks, relative
to developed -
market stocks.
Specific strategies for
reducing or «hedging»
market exposure may include buying put options on individual
stocks or
stock indices, writing covered call options on
stocks which the Fund owns or call options on
stock indices, or establishing short futures positions or option combinations (such as simultaneously writing call options and purchasing put options) on one or more
stock indices considered by the investment manager
to be correlated with the Fund's portfolio.
Juicy Excerpt # 12: I believe that there are occasional periods when the broad
stock market is overvalued enough that one might choose
to reduce exposure or step aside completely.
The investment manager expects
to hold an unhedged, fully - invested position in common
stocks in environments where the expected return from
market risk is believed
to be high, and may
reduce or «hedge» the
exposure of the Fund's
stock portfolio
to the impact of general
market fluctuations in environments where the expected return from
market risk is believed
to be unfavorable.
The investment manager expects
to intentionally «leverage» or increase the
stock market exposure of the Fund in environments where the expected return from
market risk is believed
to be high, and may
reduce or «hedge» the
exposure of the Fund's
stock portfolio
to the impact of general
market fluctuations in environments where the expected return from
market risk is believed
to be unfavorable.
When
market conditions are unfavorable in the view of Hussman Strategic Advisors, Inc., the Fund's investment manager, the Fund may use swaps, index options and index futures, or effect short sales of exchange traded funds («ETFs»),
to reduce the
exposure of the Fund's
stock portfolio
to the impact of general
market fluctuations or
to market fluctuations within a specific country or geographic region.
For investors seeking long - term investment returns in value - focused
stocks over the complete investment cycle (bull and bear
markets combined), with added emphasis on
reducing exposure to general
market fluctuations in conditions viewed by the Advisor as unfavorable
to stocks.
For investors seeking long - term investment returns in the U.S. equity
market over the complete investment cycle (bull and bear
markets combined), with added emphasis on
reducing exposure to general
market fluctuations in conditions viewed by the Advisor as unfavorable
to stocks.
Not everyone can stomach that kind of volatility and I witnessed firsthand clients who felt compelled
to reduce their
stock exposure or even go
to cash at or near the
market lows.
Investors who add real estate
to their investment portfolios further
reduce their
exposure to risk since SFR returns are highly uncorrelated
to the
stock market, according
to Roofstock's new data.
Both SigFig and Sofi had some of the highest allocations
to emerging
market equities, which reflected a broader trend among robo - advisors
to increase allocations
to international equities while
reducing exposure to U.S.
stocks, according
to the Robo Report.
Once you've determined how much
exposure to the
stock market is right for you, consider whether well - selected actively managed funds can
reduce the volatility of your portfolio and the risk of loss.
Used wisely, they can
reduce the risk of your portfolio and allow you
to gain
exposure to the
stock market for a relatively low investment and as such, tap into considerable gain potential.