A Guide to Hedging for the Amateur Investor: Part I

A Guide to Hedging for the Amateur Investor: Part I
Specialist Anthony Matesic works on the New York Stock Exchange's trading floor on May 23, 2022. David L. Nemec/New York Stock Exchange via AP
Gary Brode
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Commentary 

I’ve been seeing a lot of important questions recently from amateur investors regarding some of the more advanced topics in the investing world. Many people have been taught about things like diversification and dollar cost averaging, but don’t really understand concepts like hedging, offsetting different kinds of risk, or shorting stocks. That’s not a problem because no one is born knowing these things, and these topics are rarely discussed in detail on popular finance shows. Let’s go over some of the basics of how to think about hedging, and along the way, we’re going to show you some of the specific ways we address risk in our own portfolio.

Gary Brode
Gary Brode
Author
Gary Brode has spent three decades in the hedge fund business. Most recently, he was Managing Partner and Senior Portfolio manager for Silver Arrow Investment Management, a concentrated long-only hedge fund with options-based hedging. In 2020, he launched Deep Knowledge Investing, a research firm that works with portfolio managers, RIAs, family offices, and individuals to help them earn higher returns in the equity portion of their portfolios. Mr. Brode’s work has been featured in the Wall Street Journal and Barron’s, and in appearances on CNBC, Bloomberg West, and RealVision.
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