Never Fear Losses

My worst runs are when I am reticent to lose money. This logic applies to the downside too, afraid to hedge a portfolio cresting higher or shorting into the hole. The market isn’t always going to go up and there will be periods when you’ll want to lock in profits. Some don’t due to tax concerns, not wanting to realize gains and pay taxes on them.

There is another way, if done with skill. You can pause your accounts from rising or declining by utilizing inverse ETFs. If you have an account 100% long with a beta over 1, you’ll likely need to place 20% of your account into $SQQQ in order to effectively hedge it. If you wanted a net short position, you’d need to do more. You can also get specific and hedge against certain sectors, such as biotech ($LABD), semis ($SOXS) or oil ($DRIP).

The bearish ETF with the most negative beta is $UVIX. But remember to bet with VIX is dangerous, since it’s rigged. You’d want to be long VIX during a black swan event, war, or general market collapse. A long time ago, I once had 30% of my book in VIX whilst undergoing an endoscopy and the markets CRASHED in what we now know as the “flash crash.” I made $5m in total on that trade and it was by pure luck.