We are in the last month of the fourth quarter of what is literally an incredible year, and you get the feeling that the world is waiting for the next "bad news". Investors have already had to contend with the fastest bear market in history, the fastest recovery and a technology boom. What will happen next?
What we know for sure is that large percentage of capital losses in the stock markets require larger subsequent percentage of capital gains to compensate for the book losses. So the greater the losses, the disproportionately greater is the percentage of gains required to compensate for the losses. Similarly, the longer the period in which the losses occurred, the greater the profits required and/or the longer the period in which the profits must be made.
The S&P 500 Index, for example, fell by 49% from the beginning of the subprime crisis in August 2007 to the market low point in February 2009. It then took a further 4 years, during which the market gained 98%, to fully compensate for these losses, i.e. the subsequent gain was almost twice as large as the losses at that time.
As William Arthur Ward's quote above says, it seems more than appropriate in the current environment to act now so that one does not miss the opportunity to protect a long-only equity portfolio before the next equity market correction occurs.
3D Capital Management, a specialized US based investment manager with whom we work together on an exclusive basis in Switzerland, does just that. The exclusive focus is the management of equity market risks every day, because every day matters.
If you would like to learn more about this unique and very successful strategy with a 9-year track record, please contact us.