Chris Lau - Seeking Alpha

Wednesday, July 02, 2008

Stock selection is only one factor in successfully profiting from the equity market. The more significant weight for a portfolio performance is sector allocation. For those who don't like to play the short-selling side of trading, I would recommend a small allocation on bear funds. In Canada, I like HXD.TO It has a beta of 2, meaning it is twice as volatile as the TSX Index. It's counterpart is HXU.TO.

Since I remain bearish on both the energy and the financial sector, I favor investors consider having no more than 5% of their portfolio on HXD.TO. It's better to profit in a falling market than to watch 100% of it exposed to the bear.

My target is for this hedge is $19.90, a 9.50% on top of today's gains.
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