Better Than Cash
How to Hedge Your Portfolio With the 10X Switch
Last fall, one of my readers reached out to ask me to talk about alternative ways to invest in cash in a future issue.
The crux of the question is that he wanted to know ways to be better prepared to protect what he had and yet “safely” make money if the market crashed.
First off, let me give some folks a reality check…
Generally speaking, profit potential and safety are related…
If you want a high level of safety with your money — and therefore lower risk — you generally aren’t going to get a high rate of return.
That’s why savings accounts pay less than 0.5% — and CDs and money market accounts pay not much more.
On the other side, if you want higher profit potential, you generally need to take on more risk.
That’s the nature of investing, and if you’re going to put money to work, you need to be prepared for occasional losses.
But back to my reader’s question, I want to be clear about one thing…
Protecting your money and still making a profit CAN happen together.
How the 10X Switch Breaks the Rules
One of the topics I’m going to cover in my presentation this week is how to “hedge” a portfolio.
Hedging is a term that often gets a bad rap. But the reality is, it’s simply an approach to using a small portion of your portfolio to potentially protect against losses AND even profit from extreme circumstances.
In other words, it’s better than going to cash.
There are several reasons why. One of them I have already covered yesterday when I talked about the No. 1 reason most investors make — falling prey to emotional decisions.
The problem with getting out of the market and going to a cash position is that most investors do it at exactly the wrong time…
So they tend to lose money on the way down … get out at the wrong time … and then their cashloses again by missing out on the gains when the market goes back up.
Going to cash is a really bad idea for the average investor.
But I also think blindly buying and holding a market index fund is a bad idea. It’s not just that you’re holding a basket of mostly bad stocks when markets roll over…
It’s that historically the market has averaged a measly 7.6% annual return.
That’s fine if your holding period is forever like Warren Buffett. But I don’t know many folks who can go back to their 20s, put $10k into the market and let it ride for the next 50 years.
That’s why rather than going to a cash position, I believe in using a strategy like the 10X Switch to hedge your portfolio.
In other words, if you’re a buy and hold investor with a market index fund or similar mutual funds, you could leave 90% of your portfolio in that and simply put 10% of your money to work with the 10X Switch.
Now you may wonder, can such a small amount really make a difference?
In fact, I’m going to show you on Thursday night how a small hedge of just 10% could have helped you QUADRUPLE your money from 2006 to 2018, despite the massive market drop in the Great Recession.
And a larger hedge position of 30% in the 10X Switch — still keeping 70% of your money in an S&P 500 Index “buy and hold” position…
Could have helped you more than 10X your initial investment…
Turning a $10,000 investment into almost $120,000…
Or a $100,000 portfolio into nearly $1.2 million.
All possible with the bulk of your portfolio in a market index fund and a small hedge position using the 10X Switch.
That’s the power of the 10X Switch…
Allowing you to stay in the market at all times and potentially profit from major swings in volatility, both up and down.
I look forward to seeing you on Thursday night.
Chief Investment Strategist, The 10X Switch