Eric Roseman Says Short Selling Will Help Protect Your Portfolio
Aug 22nd, 2008 | By Eric Roseman | Category: Stock Market InvestingWhen the bulls rule, it’s pretty easy to make money in the stock market. But The Sovereign Society’s investment director, Eric Roseman, says the next several years will be rough for global investors. That’s why successful investors will need to learn how to embrace short selling and hedging to protect their portfolios…
Since stocks peaked last October global markets have plunged more than 20%. Some bourses in the emerging markets are down more than a third. Chinese stocks have crashed 53% from their best levels last fall, Indian shares are down a third and Russian stocks more than 25%.
In short, it’s been almost impossible to make money in this market unless you’re a skilled short seller or capable of managing a portfolio of long/short equities. In this world, that’s a rare breed of money-manager.
Over the next several years, possibly longer, global investors will probably earn a higher rate of return by employing skill-based long/short equity hedge funds compared to index funds or exchange traded funds.
The long/short equity hedge fund is a rare breed. Investors must be careful because the majority of hedge funds coined “long/short” don’t even short! It’s almost a crime that these hedge funds get away with charging a 20% profit fee for lagging the index.
The fact is most long/short hedge funds don’t know how to short altogether and trail the markets’ long-term return. It’s a great business for the sponsors but horrible for investors. Be highly selective if you’re looking at these funds.
Meanwhile, avoid the growing universe of long/short equity funds available to retail investors in the United States. They stink. These products have posted poor results - mostly negative returns - while levying hefty management fees. Again, these guys have no idea how to protect a portfolio of stocks.
The era of passive investing with no market hedges is over. The next several years will be rough for global investors. Learn how to embrace short selling and hedging to protect your portfolio.
P.S. Aaron Lehman, contributing editor for The Smart Profits report recommends investors short the PowerShares QQQ (NASDAQ:QQQ) and the Diamon Trust ETF (AMEX:DIA). Read on here for more details on Aaron’s short-selling strategy.
Source: It’s Time to Short and Make the Real Profits
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Eric serves as an editor and Investment Director for The Sovereign Society's Commodity Trend Alert. Eric's talents include blending a dozen or more alternative investment funds to produce consistent returns to traditional asset classes and making commodity based recommendations with huge upside and limited downside.
