Monday, January 5, 2009

Hedged Growth Portfolio Ended 2008 Positive

The Hedged Growth Portfolio started in Oct 2008 was actually able to end the year at $1,003,451 for a gain for $3,451. Not bad considering how bad the environment was in Q4 of 2008. The S&P500 was down 22% during that period.

Alot of the reason for the outperformance is that the fund is designed with up to 1/3 of the portfolio in short positions. Using the UltraShort Real Estate ETF (SRS), the portfolio was able to offset some of the losses in the 2/3s long positions. Unfortunately though, its been well documented of late that these Ultrashort ETFs aren't good for long term investments and the remaining position in SRS and the original position in the Ultrashort Oil & Gas ETF (DUG) have provided negative returns. In fact the position in DUG is now down 44% proving you can have the right thesis but the wrong vehicle and still lose money in this market.

Another saving grace is that the portfolio invested in short term Bond ETFs that provided nice returns compared to likely losses in stocks. Also, timely investments in BMY and NYX helped offset the weak market.

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