We are activating your personalized hedge ("short") to its maximum level. The goal is that part of your portfolio earns profits when the market declines so you capture alpha.
This is based on our internal indicators of current market conditions. We think this volatility presents a ripe opportunity for alpha.Â
Reminder: the hedge is designed precisely for environments like this (and is where hedge funds get their name - they outperform in choppy waters). It is both defensive and offensive.
#1 Defense - it reduces your exposure to volatility
#2 Offense - it enables you to earn profits when the market declines
Your portfolio will now effectively be long 20 stocks and partially short the market, which hopefully can result in net outperformance (alpha). Notice: our tone is probably dramatically different than what you may be seeing in the news. Our goal, as your fiduciary, is to help you grow your capital with profits in all environments, even choppy ones.
We're hosting an Investor Call on Monday (Titan clients only) to discuss the coronavirus, the hedge, and when to possibly "buy the dip."
Date: Monday, March 2nd, 2020 Time: 7:30-8:00pm EST (4:30-5:00pm PST) Registration: Click here to register (we have limited capacity)
We'll share more materials on Monday for those who can't make it.
For more on our Hedging process, see here.
The nitty gritty Q&A##
Remind me again about hedging ("shorting")? This is what hedge funds do. We short the market during tumultuous periods so you can hopefully profit when it goes down. Hence our shorting is counter-cyclical. It enables you to keep the majority of your capital invested for the long term (i.e. not selling and facing tax consequences). The goal is that a portion of your portfolio reaps profits in all environments.
Trading: We're going to initiate your hedge on Monday and Tuesday Over the next few days, we'll move a portion of your capital from your Titan equities to short the market via an inverse S&P 500 ETF. We'll then continue to monitor your portfolio and hedging criteria.
What's your view on markets? Fundamentals look strong, but market technicals suggest volatility is likely in coming weeks. Market conditions have deteriorated materially in just the last few days, presenting opportunities - everything is going on sale. Underlying fundamentals of U.S companies remain strong on a multi-year forward basis, but our technical indicators suggest the sell-off could continue in the near term as the coronavirus crisis unfolds.Â
What's your view on the coronavirus? The reported number of cases should continue to increase. There's a 10 day lag in the coronavirus incubation period, which means the reported numbers we're seeing will continue to get worse before they get better. So this "dip" (and potential "double dip") will present a buying opportunity for you to obtain alpha. On both the long (stocks) and short sides (the market).Â
You don't have to do anything As your fiduciary, we automatically do all this behind the scenes. Your hedge level is based on your individual risk tolerance (Conservative, Moderate, Aggressive) as of Feb 14th. If your risk tolerance has changed, you can update it in the app under Account > Settings > Account > Account Profile > Financial > Investing Style. Any changes will be reflected at the next rebalance.
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