Should You Hedge The S&P 500?

Hi Guys,

This week was my final week for my current training cohort. 

There was a question that came up on Wednesday that I wanted to share with you because it incorporated three of my “first principles” into one question. 

What was particularly great about this question was how applicable it is to all people wanting to grow their money—whether they live in or out of the US (read: whether they are paid in US dollars or any other currency). 

All first principles—whether they’re mine or someone else’s—have to always work, regardless of income, currency, or risk tolerance. 

Think of first principles like gravity. Believing in it or not doesn’t matter. Gravity is there whether you live in Canada, Singapore, South Africa, or South Dakota. 

With the US stock market and most of the world’s stock markets breaking out to new lifetime highs, understanding and living these first principles is more important than ever. 

The first principles used in the question on Wednesday are:

  1. The strongest investing questions always include price charts (investing = stocks/bonds/ETFs/Funds/Sectors/Indexes)
  2. Eliminate interpretation of a question by replacing words with price charts
  3. Knowing what to buy is the easy part

A little explanation about #3: we are all taught that knowing what to buy is the “one thing” you must know. Yes, you must know what to buy (this is self-evident). But this is only a very small part of investing. 

And once the question reveals the answer to what to buy, the investor is then left with left with (1) How do I enter? (2) How long do I stay? (3) When do I get out? (4) How much do I invest?

This third principle is why “hot picks,” or the next “Facebook of Brazil” can’t help investors. 

Does this make sense? If not, let me know by emailing me at rc@fearlesswealth.com. Below is the link to this week’s video. 

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