hr: Money

Some might think that stacking your cash under your bed while you sleep is a good idea to hedge yourself against risk. Well, it might be far more risky avoiding risk all in all as this may not meet your financial goals and it might not even beat inflation. Hedging yourself with risky asset classes could not only mean giving your portfolio a way to minimize exposure to risk but also a way to perk up your portfolio that has long been following the market’s mood.

1.       Currency Futures

One of my closest relatives, my aunt to be exact, moved to the United States to be a Registered Nurse. She is now retiring with her husband in Canada with all those US Dollar denominated income. In times where the greenback is getting hit hard, is it a nice idea to not protect her income with the dollar’s weakness?

A way to protect your portfolio from currency depreciation is hedging yourself by buying other currency as well. If you were to hedge yourself against the weakness of the greenback by buying Euros back then, you could have sold the Euro Dollar at a high of 1.60 to the US dollar a long time ago.

2.       Short Selling

Short-Selling is definitely not for everyone. As the risk for capital loss is endless, and the reward measured by how close the company is for de-listing or chapter 11, short-selling could be a rewarding way to: Bail you out from your wrong sizing of position, or a way to reduce your position to a very comfortable level.