Risk strategies to adopt when markets turn mad

Financial Times/Michael Mackenzie

Repost from 4-25-2021


cartoon of a hedge fund manager on the phone telling a client to buy gold

“It is not hard to spot signs of the froth and speculation in current markets. Every week seems to throw up cases that challenge any precept of rational investing.”

USAGOLD note: The point of this article is that “beat the market” strategies, or, even worse, “all-in” strategies can end up being big losers when an economic or market crisis occurs. Less than half of risk management strategies, Mackenzie points out, ended up performing well during the pandemic with some taking losses of more than 25%. At the risk of being accused of mercilessly beating the same drum, wouldn’t it make sense to adequately diversify one’s portfolio before the event? The ultimate risk management strategy against a variety of negative financial scenarios is to simply transfer 10% to 20% of one’s assets to gold and silver.

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