What is a Hedged Equity?
We believe hedged equity is a better way to invest.
So what exactly is hedged equity? Hedged equity simply involves buying equity in some form, an underlying investment, and then securing a hedge to offset losses connected to market risk (i.e. the whole market sells off or the economy slows due to unpredictable events, like COVID-19 or a mortgage crisis).
There are many ways to hedge equity: options contracts, futures contracts, and investments in other assets believed to behave in a non-correlated manner in relation to the underlying investment (like gold or bonds) during various marketing conditions. Put options, for example, are inversely correlated to the underlying investment, and therefore may serve as an effective hedge.
While hedging is often considered a short period tactic, long-term investors may want to consider the benefits of a long-term hedging strategy.
Since 1997, our Defined Risk approach to hedged equity has redefined the risk/return profile of long-term equity investing.