Like most firms out there, our firm has seen a sharp decline in AUM based on market value and clients pulling out of the equity markets. Since AUM is the sole source of revenue, at some point, cuts will need to be made if the market goes low enough. Would anyone recommend shorting broad market ETFs in my personal account? Or even leveraged short ETFs? Or would put options be the way to go here? Just curious what peoples thoughts are on this?
I personally wouldn’t bother…you are shorting a broad index as a hedge of you keeping your job. Its sort of like shorting tech companies because if they go under you wont have a computer to work on and will probably be let go as well…whats the point? I guess if you wanted to actually take a position you could short your specific company (which has all sorts of implications in my mind), with the idea that if your company sucks so bad you lose your job…but what if your company sucks and you keep your job? I understand shorting an index, but for this purpose I think it is silly
I do it by saving money.
Yeah…I think financial advisers recommend having enough cash to cover 6 months of living expenses…Plus I think you can get unemployment benefits for like 6 months?
Yeah rule of thumb is 6-9 months emergency fund. Covers all your fixed expenses in the event of a job loss. In this economy you might even want more…
tvPM Wrote: ------------------------------------------------------- > > I guess if you wanted to actually take a position > you could short your specific company (which has > all sorts of implications in my mind), with the > idea that if your company sucks so bad you lose > your job…but what if your company sucks and you > keep your job? I understand shorting an index, but > for this purpose I think it is silly Looking at shorting your company a different way, when they fire / restructure employees, the stock may actually go up. I think the best way to hedge your current employment is to learn another skill set or enhance your current skill-set (could be through completing the CFA program)
Hedging employment by making your portfolio underweight your industry is not necessarily a bad idea long term, but I dont think it really works as unemployment insurance. The kind of downswing it would take to get you axes is probably not as large as one would hope, so you’d need a very large concentrated position to offset a typical salary. Then the company specific risk would probably be substantial too, so company specific stuff could be you fired, while the industry does well or neutral.
Hedging employment by making your portfolio underweight your industry is not necessarily a bad idea long term, but I dont think it really works as unemployment insurance. The kind of downswing it would take to get you axes is probably not as large as one would hope, so you’d need a very large concentrated position to offset a typical salary. Then the company specific risk would probably be substantial too, so company specific stuff could be you fired, while the industry does well or neutral.