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Jay Pestrichelli, author of "Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term," gives his tips for investing in a volatile m...
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Well our next guest says that the best way to protect yourself and then market's recent swings is to buy and heads.
He says his investment strategy has beaten the S&P 500 by 50%.
Over the last three and a half years joining us now is -- pastor tally.
-- saying it co-founder and principal and author of the new -- but -- buy -- heads the five iron rules for investing over the long term.
CDO because volatility is the name of the game in this market environment.
You're saying that every day investors.
Can employ a simple tools to a high tech heads and that it actually -- -- a lot more money.
Yeah really that's about -- thanks I outside yeah reducing volatility is probably one of the most important factors that an individual can do think it.
-- about how they're trying to navigate through these peers right it's volatile when we say volatile means that there's.
Usually big down -- in the market right at the market was up on volatility who's going to be upset about right so this is.
Really depreciating asset values of of client's account so we talk about hedging we talk about protecting yourself we talk about.
Establishing a base where you can't lose any more money after a certain point in the market and and in the book we outline a lot of tactic.
Most people feel that this is out of their reach said it's something left for sophisticated investors -- gives some -- where viewers out there are so that they can learn to start hedging and and protect themselves.
Yet if you think about.
Insuring yourself people do it every day in my car insurance you my homeowner's insurance.
You buy travel -- -- People are used to hedging they just don't know it yet one up by portfolio insurance it's we use the options market to -- protection in the portfolio.
Things as simple tactics like buying what we call America agreed in an umbrella policy like we call -- portfolio put.
When we get an outline in the book exactly how individuals can do it themselves -- -- some -- it tips here we see a -- on the screen know your risk metrics hedge every investment.
Unleash your inner grow and we should monitor -- that it.
You know what.
Individuals have some knowledge right whether -- the industry you working you're going to be great at something.
How whether it's something that you're just a good investor and a specific sector we want to keep track of that -- to learn from a kind of investor you're going to be but I'll tell you.
The most important rule -- haven't had every investment we really -- mature individuals matched.
A an excellent audience though united business when you're TD Ameritrade so we know each other very well I did the idea of rescue talk about them a lot how does the average person -- risk you know in other words.
A lot of people who probably bought Netflix at 280 dollars a share not thinking that it was a risky investment.
Yeah and I'm glad you brought this suntrust is that is a great example of why you need to understand your risks so often.
An individual investor will think of the reward before they think of the risk you need to think of risk person and that's apparent when you own stock.
The potential is that -- can go to zero.
And nobody thinks it's gonna go to zero and -- -- but the potential is seeking go to and we don't make that assumption within a stocking a portfolio we look at -- -- -- capital at risk anytime mathematically what is the most you can lose on a specific position that's one of the Riskmetrics we absolutely look at -- -- we define our hedges does.
A problem I have a lot of individual investors they feel like that hedge that you're talking about it's one thing and you buy and airline ticket and it's five bucks they feel like that's a lot of money -- money that's wasting away especially -- bull markets.
How do you convince some that say listen it's really worth that.
One time when you could really crack everything up how you get that message through.
Yet well if there's any market here that could show us why hedging pays off it's the last three years right if you started hedging in 2007 or 2008.
You feel like you've been pretty smart write your poll portfolio would be outperforming.
The markets are volatile that volatility is not gonna go away if there's any market that you prove why you should -- we're in the middle and right.
For really go we only have twenty -- gains other than buying puts and calls out there -- little bit more fancy after lack of a better work what are other ways investors can had some cells.
Another way that an investor can invest in protect himself -- what we call a pair straight right we like to use ETS because of the broad diverse nature that they provide.
You can using ETF and paired up against another individual stock in that way as one goes on the other normal -- down but we had we feel options are really the single best way to for an of it in the right.
