“Many equity investors are feeling okay right now. Yes, the 2008 financial crisis was downright scary, with exploding credit spreads, disappearing financial institutions, and sharply declining stock market. However, if investors have stayed in equities since then, their wounds have healed.
“The hard reality is that recessions happen. During a recession, the market tends to decline more than 40%. We tend to have recessions every 7–8 years. The last one ended in early 2009. Now that investors are whole again, the last thing they want to do is sit on their hands and watch their assets slip away again. We are all six years older and closer to retirement, so we have less time to recover from market declines.
“However, we are also six years wiser. A number of liquid tools in the form of index-based ETFs have been created, trading technology has advanced, and implementation costs are not an issue. So, is there a way to hedge your stock market risk without trying to “call the top” and duck just in time into bonds or cash? The answer to that question is yes.”
See the full story in Forbes: Using ETFs and Options To Hedge Equity Exposure In An Overvalued Market | See important disclosures.