How my hedge fund will outperform the market

This week is pretty bearish so far.

When the market is doing well, your stocks go up and my hedge fund goes up as well.

There's not many opportunities that a hedge fund can outperform the market when the market is very bullish.

You can only beat the market during a bull market with either leverage or better stock selection (which the latter is much harder than it looks)

During a bear market, this is where my hedge fund will shine.

During a bear market, we first hold cash.

This means if S&P 500 -5%, we will be down 0%. This generates better than market return by 5% simply by holding cash during bearish weeks.

Second, we take on a short position.

This means if our short position makes +5%, we will be +5% vs S&P 500 -5%. Hence, we would be +10% ahead.

Currently, we have taken on a short position.

These are the bearish weeks where we can get ahead of the market.

This is why Mark Cuban said everyone is a genius during a bull market.

Because the real test comes from bear markets.

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Cheers,

Eric

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Eric Seto

Chartered Professional Accountant (CPA)

Chartered Investment Manager (CIM)

Founder of 5MinInvesting.com

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