 Good day, fellow investors! Now everybody knows stocks are overvalued, the market is high, valuations are high, but if you sell now, you might miss on the next five years of stocks going up, because nobody knows when the market will crash. So, if you don't want to sell, because we know it's impossible to time the market, what you can do is to be hedged, to be protected for whatever happens. And today I'll discuss seven unconventional hedging strategies that can be applied by everybody that are simple, not complicated, and not expensive. Some hedges are even free. So, let's immediately start with discussing hedging for your portfolio. Hedging is, of course, insurance. The purpose of a hedge is that when a value of one asset declines, the hedge rises in price so that it covers the loss of the other asset. So, you insure yourself against anything that can happen. The best hedge is a hedge that makes money, creates value, has a yield, and that protects another part of your portfolio that has a yield. So, you constantly have a yield, have value, and you're protected from whatever happens. That's the best hedge. There are other hedges, but let's see in-depth seven hedging strategies. So, the first hedge that everybody can do is diversification. Diversification is usually the smart thing to do, but you can go beyond and diversify a bit more than what's the normal diversification. To be diversified normally means owning the SAP 500. That's no diversification. That's being long US stocks. And the only good about that is higher interest rates, higher stock prices. If that turns, it will be a terrible investment. The next step in diversification is owning 60% stocks and 40% bonds. Also correlated and depending on interest rates. So, if you want to be diversified in a hedged way so that whatever happens, you make money, you have to look at an all-weather portfolio as Ray Dalio is preaching. Where? Whatever happens in the economy. The economy goes up, inflation goes up, the economy goes down, inflation goes up and down, whatever, all the four scenarios that can happen in an economy, you always make money. You always have a yield. And remember, Ray Dalio made a return of 10.8% in the last 45 years. He has beaten the market. Even if the economic environment was extremely positive for stocks, he would have beaten the market in any other situation by a huge margin. He beat it by a small margin now, but if interest rates now start increasing, if inflation hits the environment, Ray Dalio will hugely outperform the market. In the description below, there is a link to my Ray Dalio all-weather portfolio and how to create one. And what does it mean to be diversified in a hedged, protective way? The second hedging strategy that everybody can do is to be prepared for financial and economic turmoil. We have all seen what has happened in 2009. If you watch the movie The Big Short, you know what was going on and how those who saw that ahead could have prepared themselves at a very, very cheap price. This is the Fed's European Central Bank and Bank of Japan balance sheets. As you can see, they all increased between four and six times in the last eight years. Because there was a financial crisis, a recession, all those banks started printing money. I call it money printing. The formal name is quantitative easing. That includes lowering interest rates, increasing credit, offering tax credits and buying assets on financial markets. For me, it's simply money printing. They insert liquidity into the system. Now, what will happen in the next recession? Central banks and politicians will use the same medicine. They will print even more money. Will their recession come in the next 5-10 years? Definitely, because the economy works in cycles. That has been the case for the last 3,000 years. It will be the case again. In 2012, ECB President Mario Draghi said he will do whatever it takes to keep the situation as is. For me, that means more money printing activity. So what we want to be is hedged against more quantitative easing, more money printing, because that will come. And now that everybody is talking about balance sheet trimmings, about higher interest rates, now is the time to be hedged at a very low cost. The best hedges against quantitative easing are assets that are fixed in supply, like precious metals, real estate, fixed supply real estate, commodities that have a fixed supply but stable demand. In this chart I have gold. From April 2001, it went up about 5 times. So this is similar to what has been going on with the increased central bank balance sheets. The correlation isn't perfect, but the trend is there. Gold prices are very much influenced by sentiment and gold prices started going up in expectations of what will happen. So in the short term, don't expect perfect correlation, but in the long term expect that gold prices will follow the amount of money in the system. And as there will be more money in the system, gold prices will go up. So that's a hedge, especially if you take it from a long term perspective and don't care about 100-200 dollar moves. I prefer gold miners as a hedge and you can check more about gold in my gold will go to 20,000 or 5,000 per ounce video. Also the link is in the description below. The third way to hedge yourself and your portfolio is to be hedged against inflation. Everybody was surprised that the huge monetary easing policies didn't trigger huge inflation, hyperinflation. However, hyperinflation can happen anytime, has happened in the past many times and can easily slip out of control. So if we see inflation, you want to be protected against inflation. Stocks are a good proxy protection for inflation because they can raise prices and cover for what's going on. However, there are even better protections for inflation and you can take advantage. We have seen very low inflation, but every central bank has a target of 2 to 4% inflation and they will reach it eventually. So 4% inflation, 5% inflation will make a huge impact on most portfolios. You want to be prepared for that. How to hedge yourself for inflation? Take a loan with a fixed interest rate. Also, link on how to invest with debt is in the description below. So if you take a loan with a fixed interest rate, if the inflation rate surpasses that interest rate, you're hedged because your payments become fixed, your income is increasing at the rate of inflation and it becomes cheaper and cheaper. So think about a loan as a hedge against inflation. Other inflation hedges are of course gold that I already mentioned, real estate and tips. Treasury inflated protection securities. But as I don't like bonds and the yield is very low, you have to see how that fits your portfolio. 4. Hedging for currency risk. Currencies move in predictable ways if you look at it from a longer-term perspective. At some point, you'll hear discussions that the dollar is too strong. It's not good for our exporters, it's not good for our economy. After a few years, that balances itself out. The dollar becomes weak and then it's good for exporters and let's say the euro becomes strong or some other currency. And then after a few years, again, it balances itself out. If we take a look at this chart from a 1985, the dollar index went down till the 1995, then went up, then again down and now it's again up. So we can say that the dollar is strong now. So take advantage of the strong dollar to diversify across the world. When the dollar is weak again, rebalance those currencies and buy again of your domestic currencies. In such a way, by looking at what's going on, where in the world you can really add a few percentage points to your returns and lower your risk because you are diversified and hedged against currency risks with a well-diversified international portfolio. The good thing is that global interest rates are even higher than the US dollar now. So you can really find some bargains around the world. Number five is liquidity, having cash as a hedge. Cash is power. It gives you the opportunity to buy bargains when the market offers bargains. And here and there the market always offers bargains. The best way I prefer to do that is, okay, the market is at this level, the valuations are at this level and let's say they are high, I want to have 25% in cash. If valuations drop to, I don't know, 20, 15, 10, or 7, when valuations are at 7, you want to be invested totally. However, and then if valuations rise, you rebalance again. You will underperform perhaps the market in the short, medium term, but in the long term, you will outperform the market with lower risk. So always keep a cash hedge because cash is power. However, power often gets to people's heads. So be careful and be disciplined and see if you can have a cash hedge. Number six, hedging outside of financial markets. We are all focused mostly on our portfolio. What can we do? What stock to buy? Was this this? What's the best stock or something? However, investing is not just about the stock market. Investing is a broad portfolio that affects and has implications for your whole financial life, be it real estate, your job, your business, your work, your whatever. And you have to put all those factors into your risk reward investment scenarios. So if you only have stocks, why don't you think about investing perhaps in some private equity, in some business that you like? Start a secondary business. Start a YouTube channel. That's also a part of diversification. Write that book that you have been thinking about writing or make that song or whatever. However, think also about hedging yourself in different ways. Get that education, get that degree. Do the test that you're waiting to do for already a few years. Hedge yourself in your life. And that's also something important and not to forget. It's not just about the stock market. It's stupid for me to say with a YouTube stock investing channel to say everything is not about the stock market, but that's the truth. So I have to be honest. I'm sorry. All right. And I'll finish with the most popular hedging option of all. Options. If you learn about options, if you learn how to buy, put options on long portfolios, you can really be protected that's lower your risk without sacrificing too much of your returns. Of course, the cons of owning options is that they expire. So in the long term, it can be very, very costly to maintain that hedge position. Nevertheless, let's see what the SAP 500 options offer as a hedge. So this is the SAP 500 option chain. And if you buy put options, you are protected against any kind of decline from the SAP 500. December 2019 means that you're protected for the next two years. For example, the put options on the SAP 500 ETF that is now at 255 points costs $22.4. That's about 9% of the actual value of the SAP 500 divided by two years, you are somewhere 44.5%. If you go to a lower strike price, so you want to be protected, let's say at an SAP level of 2300 that whatever happens, you can always sell your holdings at 2300 points, then it's even cheaper. Then we're talking about 2.5% of your current portfolio over the next two years per year. I'm talking here. So if you buy a put, which is now very cheap because the VIX index is very low, the volatility is low because nobody expects turmoil in the next two years, the SAP 500 will continue as it is. That's the most stupid thing I have ever heard. Everybody expects the past to replicate itself in the future. If you want to be protected, take advantage of these cheap put options. So by buying a put option of the SAP 500, okay, now at this level, you can spend 4% of your portfolio and you can sell it at any time you want at 2550 points per year and you're protected for the next two years. 2300 points even cheaper. So if you want to sleep well, if you want to take advantage of the possibility that the SAP 500 goes even higher to 3000, 4000 points, which is possible and you want to sleep well, okay, invest 4% of your portfolio or 2% and hedge yourself. If the return is 10%, you'll still have a nice return plus the dividend because you're the owner, you're long, the SAP 500 and you can be hedged. So it's not such a crazy idea. And this leads me to conclude on the hedges. A hedge is just another investment. It can be cheap, it can be expensive, it can be rational, it can be irrational, overpriced, underpriced, common sense and crazy. If you look at all those hedges that we discussed today, I'm sure you will find, oh, this hedge is now cheap for my portfolio, for my risk reward. And then you buy that hedge, you hedge in another way, I would do this, do that. And then in the long term, you create a very hedged portfolio. And if a crash comes, you don't care. And that's what good investors do. Everybody else will be annihilated in a crash and then leave investing altogether. If you're hedged, a crash comes, I don't care. If this comes, I don't care. I don't care. You are protected in any kind of environment. So really think about being hedged with what you're doing. One of the seven strategies, all of the seven strategies and all weather portfolio, I don't know what's best for you. So we'll keep discussing hedges, interesting hedges, interesting investment opportunities, extreme hedges, extremely cheap with huge rewards that are not only hedges, but also investments. The best hedge for me is let's say a gold miner or a different miner that protects me against a lot of things and gives me already a yield now. So that's the free hedge. If you invest in a hedge that's creating value, that's for me a free hedge because it's adding value to your portfolio. And if you have those hedges over the long term, you will have huge yields and you will sleep well. Over time, it's very important to rebalance those hedges as one increases, lowers in prices, becomes overpriced or underpriced. And then in comparison to what's going on in your portfolio, when you rebalance that you can expect constant returns over time, expect some volatility, take advantage of the long-term volatility end of the myopic market and your returns will be very, very sound and bulletproof. Thank you for watching. Keep watching for more interesting investments, strategies, looking forward to your comments and I'll see you in the next video.