“The stock market continues its remarkable run, but the prospect for a pullback always remains, especially in an environment continuously near or at record highs. The market can easily move in the other direction and an investment portfolio can follow suit,” according to AdvisorShares.
Investors may utilize something like HDGE that actively sells short individual stocks during all market conditions in an attempt to protect a portfolio during both unexpected market drawdowns and from companies that cook the books in their accounting.
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The strategy will outperform during periods of market drawdowns. For instance, HDGE gained 1.8% over the past week while the S&P 500 fell 1.4%.
Potential investors should be aware that alternative investments like HDGE are not meant as growth strategies to generate outsized returns in investment portfolios. In reality, these strategies are doing exactly what they were made for, diminishing volatility. Consequently, in bullish market conditions, the strategy may underperform, but if the markets turn, alts can shine.
For more information on alternative strategies, visit our alternatives category.