Best Hedgerows (Financials)


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With the Fed putting up interest rates and looking at margin requirements, a market fall is probably not far behind.  The question is: where do you park the money, or how can you guard principal?  We'll give you a couple of decent ideas here which we have tried -- with more to come as we talk to more money managers. 

A New York investment advisor is using the QQQ (on the AMEX), a trust made up of a portfolio of large over-the-counter stocks.  He plays it long when NASDAQ is too depressed, and short when it is too buoyant.  But understand that the QQQ can make pretty fast moves, so you have to be very much on top of the market.

Another thought is to pick one of the true bear mutual funds.  Two come to mind.  The Prudent Bear Fund (1-888-PRUBEAR), and Rydex's Ursa Fund.  The last ten years have not been good to the bears, so it is remarkable that those funds have survived.  What you do is treat them like disaster insurance, investing a set amount in them you are prepared to lose -- just like a premium.  You will lose the "premium" unless we are really in a bear market, in which case you will do very well indeed. 

If you can afford to park a chunk of funds, try New Generation in Boston, which requires a minimum investment, but a tolerable one.  New Generation also owns the Turnaround Newsletter, and both have performed very well over a long period of time in both good and bad markets.  Dealing with bankruptcies and turnarounds -- the distressed securities sector is not followed by many investors -- New Generation gets to buy the decent stuff at great prices.

 

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