Stocknectar.Org Hedge Investing Information

The EarthWhat we are about. Stocknectar.Org hopes to assist any investor large or small to maximize gains, while also hoping to minimize losses in the event of a severe stock market crash, via the following information. (Stocknectar.Org has received no approval or payment for any suggestions.)

1. Every well-known method of saving money has better alternatives.

  • FDIC-insured bank accounts and CD’s are never as safe as short-term TIPS. So-called FDIC insurance allows banks to replace your cash with bank stocks. A better alternative is VTIP, an ETF (Exchange Traded Fund) that holds short-term US Treasury Inflation-Protected Securities (TIPS). VTIP sometimes loses -2%, but usually gains about +2% annually. If you ask for “paperless statements,” there is no fee for buying and selling VTIP at Investor.Vanguard.com. (More short-term TIPS ETFs with free trading offers are listed below.)
  • Individually-bought corporate stocks and bonds are never as safe as broad-exposure ETFs. Any individual corporate investment can lose -100% during a 2008-level recession. A better alternative is to invest 1/3 in VTIP and 1/3 in VBK and 1/3 in PHDG. VBK is an ETF that holds all the stocks of the S&P 600 Growth Index. PHDG is a hedging ETF that often goes up in value if VBK loses severely. (More suggestions are listed at Stocknectar.Org/Best-ETFs.)
  • Gold alone is never as safe as a combination of gold and dollars. Gold lost -35% during 2011-2013, and the US dollar always eventually loses from inflation. A better alternative is to hold 1/2 of each–1/2 in close-to-spot gold coins and 1/2 in US dollars–and not held in a bank or brokerage account but in several safety deposit boxes in bank locations that are not prone to natural disasters. The gold cuts in half the losses to inflation and the dollars cut in half the ups-and-downs of gold. However, for “ordinary” US tax rates, you may need temporarily to sell 1/6 of your gold coins to a friend every 2 months. (More details are below.)

2. Investment resources provided by Stocknectar.Org.

3. Offsite articles by Stocknectar staff.

4. Our investment philosophy.

  • sn-how-to-be-richConsider not-spending. The true measure of wealth is not how much you earn, but how little is your proportion of spending to earnings. You can be wealthy right now–if you can simply find people whose income is half as much as yours and live as they do. Children should learn to place half their allowances in piggy banks and grownups should do similarly. If systematically investing 1/2 your salary is not feasible, try for 1/5 or perhaps 1/10. Then eventually your investment income can become as large as your salary. If your grandparents had done this, then instead of living hand-to-mouth, you and your descendants might devote their energies to helping out their grandchildren and favorite charities.
  • Never invest more than 1/5 of portfolio with a single mutual fund or with a single brokerage, company, municipality, sector or small country. The Enron scandal was not the first nor will it be the last company failure to devastate many families. Similarly, Singapore or Disney World might be good places to invest 1/5 of your savings but no more. In general, we would suggest to try to limit most investments to 1/10 or ideally 1/20 of total savings.
  • Consider long-short ETFs. The do-it-yourself SN-VAN system of long-short ETFs only requires as little as $1,000 and is able consistently to lose less than the S&P during major downturns. Click here for The Stocknectar List of the Best Long-Short ETFs.
  • Consider short-term US Treasury TIPS. SIPC or FDIC insured bank accounts and CD’s are not safe. Read the following references. SeekingAlpha.com: The Confiscation Scheme Planned for US and UK Depositors. TheNation.com: How Wall Street Defanged Dodd-Frank. US Treasuries are much safer because they are “backed by the full faith and credit of the US government.” Short-term US Treasuries generally gain or lose only 2% per year in trading value, and gain much more often than lose. Simply divide your cash between the following short-term US Treasury ETFs (Exchange-Traded Funds): VTIP, STPZ, STIP, SCHO. All of these have average returns similar to long-term CD’s,  without requiring any long-term commitment. VTIP, STPZ and STIP are in addition “inflation-protected”–offering additional gains if the value of the US dollar falters. Each of these is also available for no-fee trading at an online broker. VTIP trades for free at Investor.Vanguard.com. STPZ trades for free at TDAmeritrade.com. STIP trades for free at Fidelity.com. SCHO trades for free at Schwab.com. ACH electronic cash transfers to or from your local bank account are also free. (Do not invest in long-term US Treasury funds–they can suffer from high losses. For no-fee trading, it may be necessary to select a free membership in a no-fee program. To avoid short-term trading fees, do not sell from a no-fee ETF within 30 days after making a purchase. To avoid statement mailing fees, select “paperless statements.” Any help that you may need is available by telephoning the online brokers.)
  • For emergency cash, consider holding a combination of gold and dollars. The safest way to hold cash is to hold 1/2 in close-to-spot gold coins and 1/2 in US dollars, both held in safety deposit boxes in several bank locations that are not prone to natural disasters. The gold will cut in half the cost of inflation and the dollars will cut in half the ups-and-downs of gold. (There is a high US tax rate of 28% on long-term gains for gold. However, “ordinary” US tax rates can be achieved by selling 1/6 of your gold coins to a friend–and every 2 months buying it back and selling a different 1/6 to the same friend. If your friend can not afford to invest in gold, you can sell on an I.O.U. basis, while you hold the gold as collateral. If your friend does not want to take any risk, you might agree to buy back the gold for the same price you were paid, plus 10% of any change in gold prices, with any losses payable with an I.O.U. In effect, you are eventually paying about 1.7% of gains to your friend, while paying less on taxes. However, be sure to reconfirm the validity of any such protocol each year with a tax professional.)
  • Consider ¢entsible home ownership. The right home can make you, the wrong home can break you. The right home is easily affordable on a 15-year mortgage, close to work, has low tax and insurance rates, and includes a large two-door camper or a well-separated rental unit. If you or a relative fall on hard times, or if an elderly relative needs to live nearby, or if a young relative needs independence, or if you just need storage space–it is important to accommodate this while reducing expenses and not cramping your lifestyle. That done, home ownership is better than gold because you cannot live in a bar of gold.
  • Consider 1/1,000 portfolio to Greenpeace each year. The human race is currently non-sustainable. Things could be different if only everyone paid 0.1% of their investments annually to help preserve the free air, water and fish that support us.

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