Macroanalyst @Macroanalyst: "Only 2 days have passed..."

Singapore

Only 2 days have passed in August but we have already seen a month's worth of price action. My losing hedges from July have now turned profitable and are the sole reason my portfolio is up 2% so far in August. This is mainly due to the convexity nature of $VXX as it benefitted immensely from the volatility surge. You cannot run away from timing the markets if you want to practice proper risk management. It is often a fine line to distinguish between the two but a simple way to differentiate is the intention of market timing. If the intention is to pick tops and bottoms in the market or to predict the future movement of markets, then market timing would often prove ineffectual. However, if the intention is to adapt to market changes and reduce risk when the environment calls for it, market timing becomes a powerful tool. This is not to say that all hedging activities would be profitable. Indeed, most hedges are closed with losses. But it is those few times when hedges are needed most, that make all the difference. The fact of the matter is everyone is timing the market in one way or another. Even dollar cost averaging is a form of market timing. You are just systematically buying a constant amount every month. This works well if every market correction right itself shortly, and you do not need the money for emergencies in the interim. However, if we encounter a prolonged market downturn that lasts years and an emergency cash need arises, we would be in a fix. I know this point can be contentious but it is what it is. You either time the market or the market will time you. $SPY $TLT $GLD $SPXU $VXX