Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
One of the insights of behavioral finance is the tendency for small investors to overreact to market swings. Even a well-structured portfolio may be vulnerable to panic selling in a downturn. The article explains how a policy of tail-risk hedging could deter such behavior by putting a floor on drops in the portfolio. Instead of maintaining an overly conservative stance and an unnecessarily low share of equities, investors could hedge their portfolios by relying on options, which have become a much more feasible tool for the small investor in recent years. The article discusses the relationship between the time to retirement and the need to hedge. Investors nearing retirement have to adopt a more defensive position or hedge explicitly, but younger investors can be more aggressive and buy options with lower strike prices.
TOPICS: Retirement, derivatives
- © 2015 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600