Hedging Archives - Logical Invest

The new always hedged BUG Strategy backtests

New always hedged BUG Strategy backtests The old BUG strategy behavior during the Corona crash: You see that the crash happened in between two rebalancing’s. As we have been in a 100% bull market scenario in February, the March strategy allocation was 40% Emerging market bonds and 20% Convertible bonds. Both are equity like bonds. The inflation protected TIP bond was not a strong enough hedge. As the crash happened very fast, there was no … Read more

The new always hedged Bond Rotation Investment Strategy backtests

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The old Bond Rotation Investment strategy behavior during the Corona crash: You see that the crash happened in between two rebalancing’s. As we have been in a 100% bull market scenario in February, the March strategy allocation was 60% Emerging market bonds and 40% Convertible bonds. Both are equity like bonds. As the crash happened very fast, there was no time to switch into a more defensive allocation. The max drawdown was -32% and the … Read more

The Coronavirus Market Crash – Lessons learned

Logical Invest in Bearish Mode Since January At the start of the year, before the CORVID-19 outbreak was known, we updated our strategies to better withstand a possible bear market or large correction. You can read the details here. A Two-Stage Correction In the first stage, hedges like gold and Treasuries worked well. Although the SP 500 took a free fall, the 30-year Treasury ETF went parabolic up as the 10-year yield touched 0.6%. Gold … Read more

Logical-Invest Investment Strategy changes for 2019

We have made some quite important changes to the Logical Invest strategies for 2019. Please note that the January strategy allocations will be calculated based on these updated strategies. 401 / IRA compliant base strategies The new strategies will not use leveraged or inverse ETFs, making them and the portfolios derived from them, more 401 / IRA friendly. The changes have been backtested and do not reduce the performance of the strategies due to a … Read more

Risk Management using Timed Hedging – Avoid DrawDowns

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As you perhaps know I have invested all my money in my own strategies, and I and my family (the best wife of all and 4 nice children) are living from the return of these investments. So, I just cannot afford to lose much money in market corrections. Therefore I always try to improve the strategies to lower the risk of major losses through hedging. Timed Hedging The new “Timed hedging” is a major improvement … Read more

What is a hedge and why does it makes sense to do it?

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A hedge is always an investment which is negatively correlated to the main investment. When the main investment goes down, the hedge should go up and if the main investment goes up, then the hedge normally goes down. It is clear, that we like the first, which is to reduce the draw downs with a hedge, but not to reduce the gains. If you have a stock portfolio, then the main hedge possibilities are: A … Read more

Market DrawDown: TMV ETF hedging and timing

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The TMV ETF should stay in place for quite some long time, and it´s a great investment to harvest time decay and avoid drawdown. The big tapering drawdowns of 2013 are past history. You don’t need to look daily at the TMV short hedge. Just keep it. The ETF TMV is a loser and if you stay short it will be a long term winner. It should return about 10-15% per year. How to minimize … Read more

Hedging Portfolio: Comparison of TMV, TMF or EDV

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TMF is by far not so good as TMV short for hedging portfolio. Here is the 12 month comparison. While all treasuries had quite big losses of about -7%, a shortTMV position was flat over the year. I think for IRA accounts the better and saver way of hedging would be a part of the investment in the Bond rotation. This one should make 10-15% per year and is also good for hedging portfolio. Hedging … Read more

Strategies For Trading Inverse Volatility

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Update: You can see the most recent performance our our inverse volatility strategy here. Consult vixcentral for the daily VIC term curve. In this paper, I present five different strategies you can use to trade inverse volatility. Why trade inverse volatility you ask? Because since 2011, trading inverse volatility was probably the most rewarding investment an investor could make in the markets. Annual returns of between 40% – 100% have been possible which crushes any other … Read more

Enhancement of the Treasury hedge in our strategies

For many years, most of our strategies used long term Treasuries (TLT, TMF) as a hedge against market corrections. These Treasuries have been a safe haven asset with negative correlation to the stock market and have been used successfully to reduce the risk/volatility of our strategies. With rising rates and inflation, long term treasuries lose a part of their value as a safe haven asset. Their hedging value depends mainly on the speed interest rates … Read more