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Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term (Minyanville Media) by [Pestrichelli, Jay, Ferbert, Wayne]
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Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term (Minyanville Media) Kindle Edition


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Length: 304 pages Word Wise: Enabled Enhanced Typesetting: Enabled
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Product Description

Product Description

If you're trying to build wealth, sharp market downturns are your worst enemy. And today, they're happening far more often: in the last 18 years, the S&P 500 has experienced sixteen violent market declines. Institutions and professional investors have mastered powerful hedging strategies for dramatically reducing the risks of market volatility. Now, you can do it, too--and you can't afford not to. In Buy and Hedge , two leading investment experts show how to apply hedging as part of a long-term program for growing and preserving your assets. CNBC Fast Money guest Jay Pestrichelli and seasoned financial industry veteran Wayne Ferbert show how to systematically protect yourself against violent downward moves while giving your portfolio maximum room to run in upward markets. The authors' techniques are easy to use, can be applied to most investment vehicles, and require surprisingly little "care and feeding" once implemented. You'll discover how to:

 

·         Take advantage of the hedge-building mechanisms built into low-cost index funds

·         Invest in your ideas with confidence, because you've hedged the downside

·         Systematically manage portfolios for risk as well as return

·         Master and apply the "5 Iron Rules of Buy & Hedge”

·         Use options to manage risk, not to create excess leverage

·         Generate more dividends

·         Effectively manage cash

From the Back Cover

Grow Your Assets and Reduce Your Risks the Way Top Money Managers Do
“This book is an absolute must read for investors in today’s markets. Wayne and Jay provide a clearcut set of rules for investing that reduce portfolio volatility and provide the formula for superior long-term performance. Don’t just buy and hold—Buy and Hedge!”
—Joe Moglia, Chairman and former CEO, TD Ameritrade

“‘Buy and hold’: How many times have you heard that phrase? If the last ten years have taught us anything it’s that ‘buy and hold’ has become as obsolete as a VCR. In Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term, Jay Pestrichelli and Wayne Ferbert have provided the average investor with a road map for success in today’s turbulent markets. Over the years I have learned that there are no magic bullets for investing, but this book highlights common sense and winning strategies that will protect and grow your hard earned cash.”
—Guy Adami, CNBC’s Fast Money

“In the current financial climate, truth and trust are the most valuable commodities, and risk management trumps reward chasing. This book and the authors hit on all cylinders.”

—Todd Harrison, Founder and CEO, Minyanville Media

“If you are a beginner, [this book] will introduce you to concepts you may have never even considered in a straightforward, easy to understand manner. And if you have been investing for yourself for years, you will still find the discussion of risk and the advanced tactics enlightening. Buy and Hedge is a great resource that you will consult time and again as you master each tactic.”
—Pete Ricketts, TD Ameritrade Board member, Chicago Cubs Board member, and former COO, Ameritrade

“Buy and Hedge provides individual investors an alternative method to manage risk in their portfolios. This book comes at a critical time as markets have become more volatile and more individuals are managing their own money.”
—Christopher Larkin, Senior Vice President, ETRADE Securities


Product Details

  • Format: Kindle Edition
  • File Size: 6783 KB
  • Print Length: 304 pages
  • Simultaneous Device Usage: Up to 5 simultaneous devices, per publisher limits
  • Publisher: FT Press; 1 edition (Sept. 29 2011)
  • Sold by: Amazon Digital Services LLC
  • Language: English
  • ASIN: B005GXM5NQ
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Enabled
  • Enhanced Typesetting: Enabled
  • Average Customer Review: Be the first to review this item
  • Amazon Bestsellers Rank: #494,272 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Most Helpful Customer Reviews on Amazon.com (beta)

Amazon.com: HASH(0x9b4ce588) out of 5 stars 54 reviews
26 of 28 people found the following review helpful
HASH(0x9b9ed644) out of 5 stars Expensive risk control Dec 26 2011
By Steve Burns - Published on Amazon.com
Format: Hardcover Vine Customer Review of Free Product
This book will be educational for new investors and traders for the explanations on how to hedge investments and trades.

It also gives readers the five iron rules of Buy and Hedge:

1. Hedge every investment.
2. Know your risk metrics.
3. Construct a long term, diversified portfolio
4. Unleash your inner guru.
5. Harvest your gains and losses.

While the authors suggestion of controlling downside risk is great advice, it can be done much easier with simple stop losses than by purchasing expensive options that are sometimes 5% to 10% the cost of the stock or ETF itself. This really hurts the possible upside in any investments, you add in the slippage of illiquid options and commissions and the authors strategy gets very expensive. When simply cutting your losses when a stock drops below near term support or 5% would have the same basic affect as their hedging strategy.

Also in bear markets their strategy will of course out perform the S&P 500 because instead of huge losses because the put protection kicks in.H However in bull markets this system will under perform because put options will be wasted money on insurance in an up trending market.

I am all for managing risk in investments and hedging your bets, however I believe therr are much easier and more efficient ways to do this than the authors suggest.

This is a great read for educational purposes on how options hedging works and will help manage risk in a brutal bear market but it is time to trade with risk on in a bull market in a clear up trend.
24 of 27 people found the following review helpful
HASH(0x9b9ed890) out of 5 stars Like a seat belt for the stock market Oct. 22 2011
By LSzczech - Published on Amazon.com
Format: Hardcover
If you've never thought about protecting your retirement investments or college fund by hedging (i.e. buying insurance), you should read this book.

If you've never thought about trading option contracts to REDUCE risk in your portfolio, you should read this book.

If you're investment style is still based on buying a bunch of stock mutual funds and some bond funds and then refusing to look at your account statement for years on end, then RUN to your PC and order this book. And pay for express shipping.

Having worked with Jay and Wayne for a number of years, I know they've spent plenty of time in the financial service industry trenches and they have seen more than enough people screw up their futures by blindly adhering to losing investment strategies day after day.

They offer a conservative, time tested approach to protecting your capital. And while they will never win a writing award (enough with the pizza coupons already), they try hard to teach you what they know. This is not one of those cook books where the chef holds back an ingredient or two so you'll continue to the buy the secret sauce.

It's all there. One could argue it's too all there at times as the simple strategy path they're mapping will veer into foreign trading language and complex spread trading that's beyond, I think, a beginner's needs. Still, hang in there as much of what you'll learn will save your investing butt in all kinds of market conditions.

I look forward to see what they write next.
16 of 18 people found the following review helpful
HASH(0x9b9edad0) out of 5 stars Buy & Hedge - A must read for today's market Oct. 17 2011
By Logan E. - Published on Amazon.com
Format: Hardcover
The timing couldn't be any better for this type of book. If you aren't at least a little uneasy investing in today's volatile market than you should check your pulse. I am not a "sky's falling" type of person but for anyone that has had to start over after 2001 and again after 2008 you definitely understand the value of defining your risk for every position you enter. I found this book to be an easy read. Each chapter and topic covered are nice and short making it easy to pick up and put down without having to start over. The authors also had some fun with the examples and stories used making it actually enjoyable to read and not boring and dry like so many other similar type of books. The profit/loss graphs made even some of the more complicated strategies easy to comprehend. Whether you are just beginning, been trading forever, trade a 100 times a year, have never sold anything you ever bought, trade for growth or trade for income, do it all on your own or trust someone else to do it all for you the "5 Iron Rule for Investing" and this book are still for you.
6 of 6 people found the following review helpful
HASH(0x9b9edd4c) out of 5 stars Buy and Hold is far from dead but Buy and Hedge strategy could help reduce your risk (and potential return) Nov. 9 2011
By Sidarta Tanu - Published on Amazon.com
Format: Hardcover Vine Customer Review of Free Product
Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term (Minyanville Media) is a very good book explaining on how you can reduce your overall portfolio risk by utilizing/adding other financial instruments that are available out there in the market. One vehicle covered is the use of Options. Below is the some of the common use of options to hedge against the current position.

Example 1. Buying put options on top of owning the shares or what is called protective put. This move is similar to buying insurance, and as you know insurance is not free but can help limit your potential loss (and the more you want to limit your loss, the higher the option premium is. just like insurance, if you want higher coverage and lower deductible, the premium will be higher).

Example 2. Issuing call options on top of owning the shares or what is called covered call. This move helps you to get more steady return (almost like periodic dividend/coupon except that it is not as certain as the stock price can change where your shares might be called/forced to sell (albeit at a good price) when the stock price increases above the call strike price, or if the option premium suddenly dropped where you will not be able to issue as high premium as before.

Don't get me wrong. I'm a big fan of covered call myself (and other buy and hedge strategies) but these strategies are not silver bullets. In fact, no one single strategy out there is a best strategy. Each strategy works well in a particular scenario and not so well in some other scenario. For example, in the covered call example #2 above, if the stock that we did covered call for 10% additional income/gain from issuing the call option, and the strike price is 10% above the stock purchase price, then you bank 20% gain which is nice, but if the stock price doubles, you could have gain 100% if you use buy and hold strategy (and no option). And for example #1 above with protected put, if the stock dropped a lot then you are protected from the loss but if the stock stays the same or goes up, then you would lose the amount of money that you paid for the put option/"insurance" (but it's true that with the protective put, the worst case it that you lost only small amount of the premium vs the potential loss of the entire principal, which is important, but not necessarily a move to maximize return).

Learning these buy and hedge strategies are crucial (as you will have more tools in your hand to get the edge vs other people out there), but what I think matters even more is find out what you are good at. If you are good at it, not matter what strategy you use (be it short term trading, buy and hold, buy and hedge, speculating, income/yield investing), you will be successful.

Also knowing yourself (what you are good at, what you are not good at, what you know, and what you don't know), and understanding your goal and risk tolerance will help you find the strategy that will be optimal for you. And most likely buy and hedge could be one of the strategy that you would use at least in some of your investment at some point in your life, if it is not now.

Last but not least, always take what you learn from a book or others with a grain of salt and use your common sense before applying any strategies.

Sidarta Tanu
12 of 14 people found the following review helpful
HASH(0x9c051e60) out of 5 stars Clear, Logical, Practical Oct. 23 2011
By themuddog - Published on Amazon.com
Format: Hardcover
We are always being told that we should hedge are investments (usually after the market does something really unfortunate), but you never really know what that means and if you are really hedged. Finally someone has taken a practical approach to hedging that makes you feel like you are still investing, not preparing for an earthquake. It's also a bonus that you don't need a phd in Mathematics to follow along. Like I said, Clear, Logical, Practical. Really good book for all investors.