As a trader I always think in terms of probabilities. What is more probable right now, in this time frame and I trade with that probability. It is for this reason and this reason alone I am slightly bearish on the market right now and short the RUT. If you trade in a 401k or an IRA you are most likely only long. This could be long stock, long mutual funds or ETFs but you are most certainly…long. This is a problem as there is more downside risk right now in the market. Lets work thru the problem with an analogy.
Lets say you own your own home and on our homes we pay insurance. If we were not forced to buy insurance monthly and there was zero risk of your house burning down, you would not buy insurance. There would be no need to. However, if tomorrow there was a 50/50 probability that your house would burn down and had the ability to buy insurance you definitely would. In the market, there is a 50/50 probability of your house/portfolio burning down. In this video I discuss adding insurance to the portfolio.
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