6 Great Ways To Hedge Your Portfolio From The Pending Market Crash | FAST Graphs
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- เผยแพร่เมื่อ 29 ก.ย. 2024
- Hedge Your Portfolio
The overall stock market is currently significantly overvalued. However, not all stocks are overvalued. Therefore, there are good companies at attractive valuations to be found. But most importantly, all bull markets eventually end with a bear market, and the market’s current long-running bull market is no exception. Of course, the opposite is always true, all bear markets end with a bull market. But the good news is that bear markets tend to be short in duration, while bull markets last for considerably longer periods of time. But the one we are in is one of the longest on record, but like all bull markets will inevitably come to an end.
Since investors know this either by knowledge or intuition, there is a strong desire for people to want to hedge their portfolio against the market collapse. From my long experience, the problem with hedges are that they rarely work as expected. Short-term price volatility is simply too unpredictable. Nevertheless, there are ways that prudent and intelligent investors can protect themselves from market crashes. In this video I will cover 6 that I consider to be the best and most important.
Number 1: always exercise the discipline to only invest in a stock when it offers a margin of safety.
Number 2: invest in the business and not the stock.
Number 3: invest for the long-term and avoid knee-jerk reactions to short-term price volatility.
Number 4: if retired or risk-averse, invest in dividend paying stocks.
Number 5: engage in constant due diligence and monitoring of the fundamentals.
Number 6: diversify properly but not too much or too little.
In this video I will review PepsiCo (PEP), Oracle (ORCL), Genworth Financial (GNW), 3M Co (MMM), Omnicom Group (OMC), Boston Beer Co (SAM), Metlife (MET), Walgreens Boots Alliance (WBA), Carmax (KMX), Brunswick Corp (BC), Viacombs Inc (VIAC), Stanley Black & Decker (SWK)
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#dividends #portfolio #stocks
"Overvaluations are much more dangerous than recessions" I am going to repeat that to myself every day!
Thanks for always teaching me something new every week Chuck!
Subscriber request: Intuitive Surgical (ISRG) - Thank you for your great work Mr. Valuation!
Hey chuck. I’d be interested in a video or two on something like if you had to choose 10-30 stocks that you were to hold for the next 20/30/40 years what would they be. Basically what stocks do you believe are going to be the best stocks for the next couple of years where as current price isn’t too important.
Obviously industries will change and new companies will rise or fall I am just curious on your favorite very long term picks
@@anthonyb5630 Depends on your age, your risk tolerance, your income needs, etc. The best stocks for my portfolio will not be the same as the best stocks for your portfolio, as we are two very different people. This is why Chuck (and other good financial planners) develop custom portfolios for each of their clients. There is no simple answer to your question. You have two choices: learn as much as you can and figure it out yourself; or pay a CFP to figure it out for you.
@@jamesdarnell8568 I understand that. I am just simply curious on chucks favorite few as he is older and has had way more experience as well as time in the market than me. I’m not asking so I can mimic his portfolio, just curious. Your right as I am much younger than chuck (atleast I think he isn’t 21) so my portfolio should and will probably look very different.
Wow. That was a serious waste of time. His hedge is no hedge. Your welcome.
stopandstare52: I'm sorry you feel that way because the whole point is that there is no reason to hedge if you invest properly in the 1st place. Secondarily, most hedging strategies fail to live up to what the investor's expectations are which is even more reason not to do them. Thanks for your contribution to the video. Regards, Chuck
BITCOIN
Beanie Babies!
New investor here. If I fast forward 5-10 years, and if my current undervalued stocks become overvalued, what are the possible strategies if they are all dividend stocks and I will need them in the future for retirement. Is it better to sell them all, and buy into something undervalued, sell half, or keep them 'forever' for the dividends? (been trying to get my head around yield on cost).
CHUCK is a f*ckin' MASTERMIND! 🧠📈👴🏻 #Genius
This a very important topic that has been on my mind some time now. Thanks for the wisdom Chuck! Im almost all in on dividend payers bought at decent valuations. Im just going to hold and I hope I have the fortitude to buy more if we see a real crash/bear market.
We don't deserve Chuck.
A lot of wisdom here! Thank you Chuck!
Hey Chuck, thank you so much for sharing your long and valuable experience on this ! Something I've just realized : I haven't seen you cover major miners on the channel, even though a good chunk of the sector is like healthcare : disliked even though necessary and providing a margin of safety. Is there any reason for it, or that's just a coincidence ?
Thank you so much for this excellent video with great explanations and wonderful examples. To me, your approach of hedging based on valuation is the most plausible and practical approach for the retail investor. As you are pointing out in your video and in your answers to the comments, there are plenty of other ways of hedging, but these are mostly far less applicable for the retail investor.
Excellent points. Let's remember, during 2008 cricis not all markets experienced massive losses (Florida, California, Nevada, etc). There were places which not only did lose, but gained in values. All was based on valuations (property to rents ratio). Sticking to rules protect from disaster.
Hey, probably a little quaint for a comment under a video like this one - but would you be willing to do a video detailing investment mistakes you've made? You know, the ones where you didn't follow your own principles, and maybe even the ones where you did? Mostly interested in downside, but I'm sure there's plenty where you missed on upside, given hindsight.
Uncle Chuck I love to go back and rewatch your videos just to reinforce how incredibly consistent you are with your message. It helps me see that we’re following the true path and not getting caught up in all these FOMO stocks.
Thx chuck. Timely video. I'm nearing retirement with less than 1 year away so dollar cost averaging and buying at an attractive values aren't solutions for me. I'm scaling back on equities and increasing exposure to bonds and cash. I realize bonds aren't going to perform well as rates increase but I'm trying to protect my principle and generate income with interest and dividends. I'm using the bucket approach for cash, bond, and equity allocations. Anything else I should be doing? Thx much.
Chuck great video! Do you have a video or article explaining how you came up with and developed the original fast Graphs Tool?
AS always another great job Chuck. Warren Buffet would be giving you another wink of approval.
Great content as always, thank you!
If you had to start your investment portfolio all over again today, with the goal of having an option to retire in 10-15 years, how would you theoretically built it?
Wonderful sharing of hard won and keen insights. Thank you! Especially appreciate you using the stocks we have been asking about!
Agreed! Thank you, Mr. Carnevale. Long MET, WBA among others.
Great job Chuck !
Great teaching video Chuck.
Glad you're calling the March 2020 decline a flash crash. The Blue Light special seemed to last about 5 minutes and then up she went. With the economy shut-down, the market experiences a counterintuitive rally....giving us the shortest bear market ever....
As Ken Fisher says, the market is always attempting to preprice events 3-30 months out, so recovery wasn't entirely counterintuitive.
Good solid advice... again.
Thanks Chuck, you are a making an important impact in many people's lives by sharing your prudent insights and experience on TH-cam. I'm subscribed and watch each and every video. Thanks!-Tom
Chuck, you're the best - thanks!
Very well put. What about hedging against inflation? Or we apply the same principles, but add in the notion of "Companies that adjust their earnings accordingly - i.e. consumer staples, consumer discretionary, utilities?". Could you also review he spinoff out of Merk - Organon? A few big investors have put some money in it.
Thanks and I'll see you in the next one.
Stoyan: the spinoff is too new and there really is no data that can be analyzed. Of course, other than the financial statements etc. sorry, Chuck
@@FASTgraphs Thanks Chuck!
So I took your advice, and sold half of my own portfolio which I had hedged w puts, and bought your selection. Needless to say, I want my money back!
👍🙏
Love all the fast graphs you tube. When the next bear comes even value priced stocks and dividend growing stocks will participate, not as much but will go down. Do you use any other hedges except stocks for protection when the bear growls.thanks
Thank you for your review.
The OMC business is threatened by the cancellation of cookies in browsers, which will lead to a decrease in the effectiveness of advertising campaigns therefore the company's revenue.
Thanks for awesome video chuck
Thank u
Hi Chuck - OMC looks slightly undervalued. I see only this stock as of now to hedge unless I am wrong to assume. I just opened a position of 5 shares and will keep adding on declines. Thanks for the video. Valuations do matter and they matter a lot! Have been added PRU PFG not taken a look at BEN
Great video great content . thank you for your time.
Unfortunately, some investors have funds sitting in cash or bonds and don't really want to wait 3, 5, 7 years waiting for a particular stock to become undervalued. That's a long time to make virtually nothing on your funds due to inflation. I've heard the old adage, "Time in the market is more important than timing the market."
So don't wait. Find an alternative. Something is always on sale. That's among the major and most fundamental points of virtually every video on this channel.
Who needs a hedge when you have a dip? Physical Real Estate is a great way to park money in recessions.
Thank you for useful video
Very helpful.
Chuck, do you offer advising services?
Matt: I do manage portfolios for individual clients as a registered investment advisor via the company EDMP,INC.
In a down market, correlation goes to 1.
Jan: and that is important because? That's a sincere question. Regards, Chuck
@@FASTgraphs
Because the video is about hedging a portfolio ( preserving capital ? Inverse correlation ? )
If everything you can invest in goes down together it is not much of a hedge.
I expect stocks, bonds, gold, construction, crypto will ALL go down together in the next market downturn.
Thank you for a wonderful video. I wonder how strict one should be when setting diversification criteria at times like these. For example, several Healthcare (ABBV, BMY, MRK, CAH, CVS etc.) and some Financial (PRU, UNM, PNW) companies seem to have attractive valuations now. Many good companies in other sectors are getting overvalued. How should we go about keeping a good enough diversification? I feel that maybe I should take profits on a few of my overvalued companies, and perhaps invest a bit more on the above mentioned undervalued ones (or keep the cash fr future investment). But this would damage the diversification of the portfolio (not more than 20% on a given sector). Any advice for a young beginner? Much appreciated.
I own PNW and it's a ute, not a financial.
Me personally do not follow diversification limits. I find sectors become overvalued at the same time and undervalued all at once. Right now I loaded up on healthcare and insurance companies. With that said I like every stock you mentioned and according to fast graphs they all have high earnings yield
I have a trailing stop loss for Fortinet.
Do you like Kellogg’s (k)? Do they have a good valuation and dividend history?
Some of these stocks go back to a 15 PE every 5-6 years, meanwhile you lose 5-6 years of income and inflation kills your cash. 3M at 20 times earning is awlays a good buy.
Khareef: I do not really understand your comment perhaps you could clarify. There are always other stocks to investment you do not have to lose find the 6 years of income my holding cash. But you could lose find this secures of growth if you overpay and then the reversion happens. Regards, Chuck
Do you like miners ? Gold miners like BTG and KGC? Are they good companies?
Another elucidating video, Chuck. I have a question about the orange line, which you define as the intrinsic value of the company. You often use P/E=G=15, where you know the Earnings and the Growth rate, and that generates the Price, which is the orange line. But why choose 15? The intrinsic value of a company may be based on earnings and cash flow, but there can be many other factors used to determine it. Perhaps you should define the orange line as the FASTgraphs intrinsic value, not the absolute intrinsic value. Thanks.
Leo: there are many reasons but primarily because the 15 P/E ratio represents an earnings yield of 6.67%. To my way of thinking anything lower than that does not compensate me enough to take the risk. I might also add look closely at the graphics ratio and ask yourself the same question you asked me. Nevertheless, here is a link that gets more deeply into the subject:
www.fastgraphs.com/blog/why-a-15-p-e-ratio-is-fair-value-for-most-companies/
@@FASTgraphs Chuck: I understand that P/E of 15 is your personal preference and I agree with it. I own 29 stocks with an average P/E of 15.5. But doesn't the GDF have a variable factor "Y" to adjust for inflation using AAA corporate bond yields? That should move the orange line up or down, depending on whether that yield is below or above 4.4%. Thanks again.
@@leopfeffer2419 the 15 P/E for fair value is not the only P/E we use. It just happens to apply to most average growing companies. For slow growth the intrinsic value P/E could calculate lower and for high growth the P/E equal to growth rate formula is utilized. So yes, now GDF will often calculate the lower intrinsic value P/E. For example check out ED the growth rate is 1.67% in the GDF P/E ratio calculates to 11.84. However, this is the interesting part the normal P/E is 15.73. Once again validating the relevance of the 15 P/E. Regards, Chuck
Nice video as always Chuck. But I was hoping you would cover more in terms of hedging. Something like TIPS, Bonds, Commodities (or commodity backed ETFs), even crypto.
If all your money is in Stocks, then during market crash. you will hurt. A hedge would be something like having a percentage of TIPs, Bonds, Cash & Stocks so when a correction/crash happens, you would not take the full impact in one area. Also the cash and Bonds can be sold then to get u much needed cash for the discounted stocks.
Amr: I understand your position, but I respectfully disagree. That was 1 of the main points of this video. I don't think those hedges work, and the most likely catalyst for a stock market drop currently would be rising interest rates which would also crush bonds simultaneously. Holding cash could be a hedge if you really afraid. But I don't engage in any of the things that you referenced. But I'm not judging anyone that does, those kinds of strategies simply don't suit me. Regards, Chuck
@@FASTgraphs Thanks for the feedback. Thank you for sharing your years of experience with us.
Great video tnx