Tag: hedge

What is a hedge?

A hedge is a position established to offset the risk of adverse price movements in an investment or asset. For example, an investor might purchase a put option (the right to sell a stock at a set price) to hedge against the risk of a stock they own moving sharply down.

Most investors have heard of hedge funds. They take the concept of a hedge and instead of offsetting price movements to cut risk, they actually aim to profit from those movements.  

Here’s the strategy behind hedge funds: If the market goes up, the good stocks the fund holds “long” should rise more than the weak ones fall, so the gains on the good stocks should exceed losses on the “short” sales. Alternatively, if the market falls, the bad “short” stocks should fall more than the good “long” stocks, so gains on the short sales should exceed losses.

However, profitable short selling requires superhuman timing, and the inevitable mistakes can be super expensive.

Sectors of investing can be viewed as hedges as well. Resource stocks in particular will provide a hedge against inflation, because they gain directly from rising prices for the commodities they produce.

While we think it’s important for investors to know how hedges work, we feel you are far better off investing mostly in sound, dividend-paying stocks. And to pick those stocks, follow TSI Network’s three-part Successful Investor strategy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

Get the complete guide to Investing for Beginners and build wealth with a conservative investing approach—this free report. Find out what they are in our FREE investing guide, How to Invest in Stocks: Canada investor advice on building a balanced stock portfolio

Read More

Big acquisition will spur BMO

December 21, 2023||Dividend Stocks

Bank of Montreal, along with other bank stocks, has suffered in the past year as investors worried rising interest rates would hurt borrowing demand and spur a wave of loan writedowns. However, banking regulators have toughened lending standards and mortgage stress-test levels in prior years… Read More

Here are three key updates on your portfolio

December 21, 2023||Growth Stocks

TERADATA CORP. $43 is still a hold. The company (New York symbol TDC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 97.8 million; Market cap: $4.2 billion; Price-to-sales ratio: 2.5; No dividend paid; TSINetwork Rating: Average; www.teradata.com) makes computers and software to capture and store large amounts… Read More

Three more high-quality Resource buys

November 9, 2023||Mining Stocks

We continue to recommend all investors maintain some exposure to the Resources sector—typically about 20% of your total portfolio. That’s mainly because resource stocks act as a hedge against inflation.
To further cut your risk, investors should stick with producers, such as the three we analyze… Read More

Pass on this ETF: Direxion Daily AMZN Bear 1X ETF

November 9, 2023||ETFs

DIREXION DAILY AMZN BEAR 1X ETF $18.71 (New York symbol AMZD) holds short positions in the shares of only one company—Amazon.com. The ETF launched in September 2022 and has just $3.0 million in assets under management.
The objective of the ETF is to generate a return equivalent to… Read More