{"id":1913,"date":"2022-08-24T11:00:00","date_gmt":"2022-08-24T11:00:00","guid":{"rendered":"https:\/\/moneymade.wpenginepowered.com\/?p=1913"},"modified":"2025-06-03T16:11:08","modified_gmt":"2025-06-03T16:11:08","slug":"how-to-hedge-stocks","status":"publish","type":"post","link":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/","title":{"rendered":"Survival of the Fittest: How to Hedge Against Stocks"},"content":{"rendered":"\n

During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.<\/em><\/strong><\/p>\n\n\n\n

\n
<\/div>\n\n\n\n
\n
\"\"<\/figure>\n<\/div>\n\n\n\n
<\/div>\n<\/div>\n\n\n\n

It\u2019s easy to panic when stocks take a nosedive and you see your investments fall with them. But don\u2019t fret. You can ease the blow by taking advantage of assets that increase in value when stock prices plummet.<\/p>\n\n\n\n

\n

There have only been 14 bear markets since 1945, which translates to about one every five years.<\/p>\n<\/blockquote>\n\n\n\n

So let\u2019s explore some alternative assets to see how you can protect your portfolio from bear markets and even recessions.<\/p>\n\n\n\n

How to hedge stocks<\/h2>\n\n\n\n

You\u2019ve heard this before, and you\u2019ll hear it again: Don\u2019t keep all your eggs in one basket. Diversifying your portfolio with a good mix of stocks, bonds, cash, and alternative assets is a time-tested way to keep your portfolio on track, even when the bear market dominates headlines.<\/p>\n\n\n\n

But building a diversified portfolio is easier said than done. In fact, if you\u2019re heavily invested in assets that tend to move in line with the market, you may not be diversified at all.<\/p>\n\n\n\n

Diversify your portfolio.<\/p>\n\n\n\n

One of the best stock hedging strategies is ensuring that your portfolio gains exposure to stocks and assets typically uncorrelated with stocks. To identify these stocks, many investors turn to the Pearson correlation coefficient. This statistical formula measures the historical relationship between different asset classes.<\/p>\n\n\n\n

The coefficient ranges from -1 to 1. Positive numbers indicate that two assets tend to move in line with each other, while negative numbers suggest that an asset class moves in the opposite direction to another.<\/p>\n\n\n\n

    \n
  1. Bonds<\/strong>: Investing in bonds is a popular way to hedge stock investments. Bonds provide a steady income stream, and their prices tend to move in the opposite direction of stocks. Investing in bonds can help to protect your stock investments from drops in the stock market.<\/li>\n\n\n\n
  2. REITs<\/strong>: Real estate investment trusts (REITs) are a type of investment that allows investors to invest in real estate without taking on the risk of direct ownership. REITs can provide a hedge against stock market volatility as they are less sensitive to market fluctuations.<\/li>\n\n\n\n
  3. Gold<\/strong>: Gold is a precious metal that can be used to hedge investments in stocks. Gold prices tend to move inversely to stock prices, so when stock prices go down, gold prices tend to go up.<\/li>\n\n\n\n
  4. Options<\/strong>: Options are contracts that give the buyer the right to buy or sell an asset at a predetermined price. Options can be used to hedge stock investments by allowing investors to protect themselves from price fluctuations. By purchasing a put option, investors can protect their stock investments from large price drops.<\/li>\n<\/ol>\n\n\n\n

    Best stock hedging strategies<\/h2>\n\n\n\n

    Let’s focus on assets that have historically gone up when stocks went down. We\u2019re going to look at traditional assets like bonds and alternatives like real estate and gold to see which is the best to hold during a market decline.<\/p>\n\n\n\n

    Bonds<\/h3>\n\n\n\n

    Based on our asset-correlation study, we found that bonds have had the lowest correlation to stocks monthly from 2018 to 2021. The correlation was -0.3380.<\/p>\n\n\n\n

    Bonds are considered low-risk assets because you\u2019re essentially lending money to a company or government that promises to pay it back with interest. For instance, Treasury bonds are backed by the full faith of the United States government. Treasury bonds tend to perform better during recessions because government-backed securities have a track record of being resilient assets.<\/p>\n\n\n\n

    One of the easiest ways to invest in a diversity of bonds at the same time is by investing in bond ETFs. Think of these as baskets of different bonds, including corporate, municipal, and treasuries, or a composition of bonds.<\/p>\n\n\n\n

    But remember, low risk means low return potential.<\/p>\n\n\n\n

    REITs<\/h3>\n\n\n\n

    Real estate investment trusts (REITs) invest in income-producing real estate like strip malls and apartment complexes. Regardless of what happens in financial markets, people are going to need homes, and businesses will need property to operate from.<\/p>\n\n\n\n

    A study by the investment management firm Guggenheim Investments found that REITs had a moderate correlation of 0.68 to the S&P 500 between January 2011 and December 2021. This could mean REITs are good tools for long-term stock hedging.<\/p>\n\n\n\n

    \n
    <\/div>\n\n\n\n
    \n
    \"\"
    Source: MoneyMade<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n\n
    <\/div>\n<\/div>\n\n\n\n

    Moreover, REITs must pay out 90% of their earnings to shareholders as dividends. You can invest in publicly-traded REITs as you would an ordinary stock through an online trading platform. REITs also exist as ETFs and mutual funds.<\/p>\n\n\n\n

    However, it\u2019s important to note that our study found REITs to have the highest correlation to stocks. This may have been due to how the pandemic triggered closures of strip malls and stores in which REITs invest in.<\/p>\n\n\n\n

    Our study also found that private REITs may be less correlated to stocks and thus better potential stock hedgers. But the barrier of entry is immensely high as they can only be sold to institutional investors. The best alternative to residential real estate is agricultural REITs because their correlation with CPI makes them excellent inflation-resistant assets fit for risk-averse investment portfolios.<\/p>\n\n\n\n

    Gold<\/h3>\n\n\n\n

    Gold historically has been viewed as a hedge against inflation and bear markets. Our data found that gold is moderately correlated to the S&P 500. In fact, the price of gold soared as the market plummeted during The Great Recession. The precious metal again fared well during the COVID-19 recession as the price of gold reached an all-time high of $2,062.50 per ounce, making it one of the best investment commodities. And with fears of an upcoming recession permeating the news cycle, gold may shine once more.<\/p>\n\n\n\n

    But how does one even invest in gold if you don\u2019t have a giant vault and a small army to protect it? While it\u2019s not as glamorous, you can invest in gold through gold ETFs. These are funds that aim to match the performance of the overall gold market. If you want to invest in gold directly, the easiest way is through an investing platform like Hard Asset Alliance.<\/p>\n\n\n\n

    So if gold moves high, you can win big. But be warned, you can lose if it doesn\u2019t. SPDR Gold Shares (GLD)\u2014a benchmark for the gold market\u2014has been down year-to-date.<\/p>\n\n\n\n

    But as far as its resistance to a major market downturn like a recession, it may be too close to call.<\/p>\n\n\n\n

    Hedging the stock market with options<\/h3>\n\n\n\n

    An option contract gives you the option (but not the obligation) to buy or sell a stock at a specific market price\u2014the strike price\u2014within a given time frame. An options contract is a great way to bet on the price of an underlying security, but they’re also a fast way to lose money if you don’t know what you’re doing. For hedging purposes, let’s focus on put options contracts.<\/p>\n\n\n\n

    A put option is the right to sell shares of an underlying asset at a determined strike price before the contract expires. During that time, traders can buy and sell the put options at a range of strike prices for a premium. The put options can be exercised when the current market price of the stock goes below the strike price.<\/p>\n\n\n\n

    Let\u2019s say you buy a company’s stock at $20 a share. You’re bullish and think it will go up, but you want some downside protection. So you pay a small fee called a premium to purchase a put options contract with a lower strike price of $15 that expires in one year. Eight months later, the stock price dropped to $12, but you can exercise your contract and sell the stock for $15 even though its market price is $12. In the end, you lose $5 instead of $8.<\/p>\n\n\n\n

    Put options don’t necessarily mean buying rising assets to offset losses as a hedging strategy, but are more of a way to mitigate losses from the asset itself\u2014like the stock that depreciated in our example. If you want to jump into options, you can do so through most brokerage accounts and trading platforms like TradeStation. You can also use them to buy a futures contract or just regular stock trading.<\/p>\n\n\n\n

    Put options enable you to hedge against downside risk, but options trading also means taking on risks and is generally intended for advanced traders. Plus, you need to pay premiums for options contracts on top of the strike price. Premiums are generally higher for options contracts to trade stocks that are historically more volatile. In other words, the riskier the stock, the pricer it is to bet on the market price.<\/p>\n\n\n\n

    The bottom line<\/h2>\n\n\n\n

    Bear markets are a part of life. But historically, they have been short-lived. There have only been 14 bear markets since 1945, which translates to about one every five years. So this means that if you stray too far from stocks, you may not benefit as much from the gains. Some traders even buy put and call options at the same strike price, which is called a straddle.<\/p>\n\n\n\n

    A study by the asset management company Hartford Funds found that Stocks lose 36% on average in a bear market. By contrast, stocks gain 114% on average during a bull market.<\/p>\n\n\n\n

    Overall, portfolio protection should enable you to weather the storm and hedge against stock losses. Consider the traditional stocks, bonds, and cash portfolios, but also look at assets that may not be correlated, such as real estate and gold.<\/p>\n","protected":false},"excerpt":{"rendered":"

    During a market downturn, you can hedge stocks by investing in alternative assets, options, and more. It\u2019s easy to panic when stocks take a nosedive and you see your investments fall with them. But don\u2019t fret. You can ease the blow by taking advantage of assets that increase in value when stock prices plummet. There […]<\/p>\n","protected":false},"author":11,"featured_media":1927,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[3],"tags":[110,43],"post_authors":[112],"class_list":["post-1913","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","tag-active-investing","tag-stocks"],"acf":[],"yoast_head":"\nHow To Survive Recession by Hedging Against Stocks | MoneyMade<\/title>\n<meta name=\"description\" content=\"During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Survival of the Fittest: How to Hedge Against Stocks\" \/>\n<meta property=\"og:description\" content=\"During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\" \/>\n<meta property=\"og:site_name\" content=\"MoneyMade\" \/>\n<meta property=\"article:published_time\" content=\"2022-08-24T11:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-06-03T16:11:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"800\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Dustin O'Halloran\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"8 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\"},\"author\":{\"name\":\"Dustin O'Halloran\",\"@id\":\"https:\/\/moneymade.io\/learn\/#\/schema\/person\/17e6958e1b252651d79ec9267f19b10a\"},\"headline\":\"Survival of the Fittest: How to Hedge Against Stocks\",\"datePublished\":\"2022-08-24T11:00:00+00:00\",\"dateModified\":\"2025-06-03T16:11:08+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\"},\"wordCount\":1563,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/moneymade.io\/learn\/#organization\"},\"image\":{\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png\",\"keywords\":[\"Active Investing\",\"Stocks\"],\"articleSection\":[\"Articles\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\",\"url\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\",\"name\":\"How To Survive Recession by Hedging Against Stocks | MoneyMade\",\"isPartOf\":{\"@id\":\"https:\/\/moneymade.io\/learn\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png\",\"datePublished\":\"2022-08-24T11:00:00+00:00\",\"dateModified\":\"2025-06-03T16:11:08+00:00\",\"description\":\"During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.\",\"breadcrumb\":{\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage\",\"url\":\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png\",\"contentUrl\":\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png\",\"width\":1200,\"height\":800},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/moneymade.io\/learn\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Articles\",\"item\":\"https:\/\/moneymade.io\/learn\/articles\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"Survival of the Fittest: How to Hedge Against Stocks\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/moneymade.io\/learn\/#website\",\"url\":\"https:\/\/moneymade.io\/learn\/\",\"name\":\"MoneyMade\",\"description\":\"Make Money Moves That Matter.\",\"publisher\":{\"@id\":\"https:\/\/moneymade.io\/learn\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/moneymade.io\/learn\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/moneymade.io\/learn\/#organization\",\"name\":\"MoneyMade\",\"url\":\"https:\/\/moneymade.io\/learn\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/moneymade.io\/learn\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Copy-of-MoneyMade-Icon-Default.svg\",\"contentUrl\":\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Copy-of-MoneyMade-Icon-Default.svg\",\"width\":96,\"height\":96,\"caption\":\"MoneyMade\"},\"image\":{\"@id\":\"https:\/\/moneymade.io\/learn\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/moneymade.io\/learn\/#\/schema\/person\/17e6958e1b252651d79ec9267f19b10a\",\"name\":\"Dustin O'Halloran\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/moneymade.io\/learn\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/e2490c84da8802839003ed599f49fe8d7c696422d58e7eeb5e57c6f920702ea1?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/e2490c84da8802839003ed599f49fe8d7c696422d58e7eeb5e57c6f920702ea1?s=96&d=mm&r=g\",\"caption\":\"Dustin O'Halloran\"},\"url\":\"https:\/\/moneymade.io\/learn\/author\/dustin\/\"}]}<\/script>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"How To Survive Recession by Hedging Against Stocks | MoneyMade","description":"During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/","og_locale":"en_US","og_type":"article","og_title":"Survival of the Fittest: How to Hedge Against Stocks","og_description":"During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.","og_url":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/","og_site_name":"MoneyMade","article_published_time":"2022-08-24T11:00:00+00:00","article_modified_time":"2025-06-03T16:11:08+00:00","og_image":[{"width":1200,"height":800,"url":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png","type":"image\/png"}],"twitter_card":"summary_large_image","twitter_misc":{"Written by":"Dustin O'Halloran","Est. reading time":"8 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#article","isPartOf":{"@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/"},"author":{"name":"Dustin O'Halloran","@id":"https:\/\/moneymade.io\/learn\/#\/schema\/person\/17e6958e1b252651d79ec9267f19b10a"},"headline":"Survival of the Fittest: How to Hedge Against Stocks","datePublished":"2022-08-24T11:00:00+00:00","dateModified":"2025-06-03T16:11:08+00:00","mainEntityOfPage":{"@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/"},"wordCount":1563,"commentCount":0,"publisher":{"@id":"https:\/\/moneymade.io\/learn\/#organization"},"image":{"@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage"},"thumbnailUrl":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png","keywords":["Active Investing","Stocks"],"articleSection":["Articles"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/","url":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/","name":"How To Survive Recession by Hedging Against Stocks | MoneyMade","isPartOf":{"@id":"https:\/\/moneymade.io\/learn\/#website"},"primaryImageOfPage":{"@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage"},"image":{"@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage"},"thumbnailUrl":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png","datePublished":"2022-08-24T11:00:00+00:00","dateModified":"2025-06-03T16:11:08+00:00","description":"During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.","breadcrumb":{"@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#primaryimage","url":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png","contentUrl":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d.png","width":1200,"height":800},{"@type":"BreadcrumbList","@id":"https:\/\/moneymade.io\/learn\/articles\/how-to-hedge-stocks\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/moneymade.io\/learn\/"},{"@type":"ListItem","position":2,"name":"Articles","item":"https:\/\/moneymade.io\/learn\/articles\/"},{"@type":"ListItem","position":3,"name":"Survival of the Fittest: How to Hedge Against Stocks"}]},{"@type":"WebSite","@id":"https:\/\/moneymade.io\/learn\/#website","url":"https:\/\/moneymade.io\/learn\/","name":"MoneyMade","description":"Make Money Moves That Matter.","publisher":{"@id":"https:\/\/moneymade.io\/learn\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/moneymade.io\/learn\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/moneymade.io\/learn\/#organization","name":"MoneyMade","url":"https:\/\/moneymade.io\/learn\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/moneymade.io\/learn\/#\/schema\/logo\/image\/","url":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Copy-of-MoneyMade-Icon-Default.svg","contentUrl":"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Copy-of-MoneyMade-Icon-Default.svg","width":96,"height":96,"caption":"MoneyMade"},"image":{"@id":"https:\/\/moneymade.io\/learn\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/moneymade.io\/learn\/#\/schema\/person\/17e6958e1b252651d79ec9267f19b10a","name":"Dustin O'Halloran","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/moneymade.io\/learn\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/e2490c84da8802839003ed599f49fe8d7c696422d58e7eeb5e57c6f920702ea1?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/e2490c84da8802839003ed599f49fe8d7c696422d58e7eeb5e57c6f920702ea1?s=96&d=mm&r=g","caption":"Dustin O'Halloran"},"url":"https:\/\/moneymade.io\/learn\/author\/dustin\/"}]}},"fig_blocks":[{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p><strong><em>During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.<\/em><\/strong><\/p>\n","innerContent":["\n<p><strong><em>During a market downturn, you can hedge stocks by investing in alternative assets, options, and more.<\/em><\/strong><\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/columns","attrs":[],"innerBlocks":[{"blockName":"core\/column","attrs":{"width":"10%"},"innerBlocks":[],"innerHTML":"\n<div class=\"wp-block-column\" style=\"flex-basis:10%\"><\/div>\n","innerContent":["\n<div class=\"wp-block-column\" style=\"flex-basis:10%\"><\/div>\n"]},{"blockName":"core\/column","attrs":{"width":"80%"},"innerBlocks":[{"blockName":"core\/image","attrs":{"id":1927,"sizeSlug":"large","linkDestination":"none"},"innerBlocks":[],"innerHTML":"\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d-1024x683.png\" alt=\"\" class=\"wp-image-1927\"\/><\/figure>\n","innerContent":["\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/Money_Made_Hedge_Stocks_Main_MO_bf5700ed6d-1024x683.png\" alt=\"\" class=\"wp-image-1927\"\/><\/figure>\n"]}],"innerHTML":"\n<div class=\"wp-block-column\" style=\"flex-basis:80%\"><\/div>\n","innerContent":["\n<div class=\"wp-block-column\" style=\"flex-basis:80%\">",null,"<\/div>\n"]},{"blockName":"core\/column","attrs":{"width":"10%"},"innerBlocks":[],"innerHTML":"\n<div class=\"wp-block-column\" style=\"flex-basis:10%\"><\/div>\n","innerContent":["\n<div class=\"wp-block-column\" style=\"flex-basis:10%\"><\/div>\n"]}],"innerHTML":"\n<div class=\"wp-block-columns\">\n\n\n\n<\/div>\n","innerContent":["\n<div class=\"wp-block-columns\">",null,"\n\n",null,"\n\n",null,"<\/div>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>It\u2019s easy to panic when stocks take a nosedive and you see your investments fall with them. But don\u2019t fret. You can ease the blow by taking advantage of assets that increase in value when stock prices plummet.<\/p>\n","innerContent":["\n<p>It\u2019s easy to panic when stocks take a nosedive and you see your investments fall with them. But don\u2019t fret. You can ease the blow by taking advantage of assets that increase in value when stock prices plummet.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/quote","attrs":[],"innerBlocks":[{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>There have only been 14 bear markets since 1945, which translates to about one every five years.<\/p>\n","innerContent":["\n<p>There have only been 14 bear markets since 1945, which translates to about one every five years.<\/p>\n"]}],"innerHTML":"\n<blockquote class=\"wp-block-quote\"><\/blockquote>\n","innerContent":["\n<blockquote class=\"wp-block-quote\">",null,"<\/blockquote>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>So let\u2019s explore some alternative assets to see how you can protect your portfolio from bear markets and even recessions.<\/p>\n","innerContent":["\n<p>So let\u2019s explore some alternative assets to see how you can protect your portfolio from bear markets and even recessions.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":[],"innerBlocks":[],"innerHTML":"\n<h2 class=\"wp-block-heading\" id=\"h-how-to-hedge-stocks\">How to hedge stocks<\/h2>\n","innerContent":["\n<h2 class=\"wp-block-heading\" id=\"h-how-to-hedge-stocks\">How to hedge stocks<\/h2>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>You\u2019ve heard this before, and you\u2019ll hear it again: Don\u2019t keep all your eggs in one basket. Diversifying your portfolio with a good mix of stocks, bonds, cash, and alternative assets is a time-tested way to keep your portfolio on track, even when the bear market dominates headlines.<\/p>\n","innerContent":["\n<p>You\u2019ve heard this before, and you\u2019ll hear it again: Don\u2019t keep all your eggs in one basket. Diversifying your portfolio with a good mix of stocks, bonds, cash, and alternative assets is a time-tested way to keep your portfolio on track, even when the bear market dominates headlines.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>But building a diversified portfolio is easier said than done. In fact, if you\u2019re heavily invested in assets that tend to move in line with the market, you may not be diversified at all.<\/p>\n","innerContent":["\n<p>But building a diversified portfolio is easier said than done. In fact, if you\u2019re heavily invested in assets that tend to move in line with the market, you may not be diversified at all.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Diversify your portfolio.<\/p>\n","innerContent":["\n<p>Diversify your portfolio.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>One of the best stock hedging strategies is ensuring that your portfolio gains exposure to stocks and assets typically uncorrelated with stocks. To identify these stocks, many investors turn to the Pearson correlation coefficient. This statistical formula measures the historical relationship between different asset classes.<\/p>\n","innerContent":["\n<p>One of the best stock hedging strategies is ensuring that your portfolio gains exposure to stocks and assets typically uncorrelated with stocks. To identify these stocks, many investors turn to the Pearson correlation coefficient. This statistical formula measures the historical relationship between different asset classes.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>The coefficient ranges from -1 to 1. Positive numbers indicate that two assets tend to move in line with each other, while negative numbers suggest that an asset class moves in the opposite direction to another.<\/p>\n","innerContent":["\n<p>The coefficient ranges from -1 to 1. Positive numbers indicate that two assets tend to move in line with each other, while negative numbers suggest that an asset class moves in the opposite direction to another.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/list","attrs":{"ordered":true},"innerBlocks":[{"blockName":"core\/list-item","attrs":[],"innerBlocks":[],"innerHTML":"\n<li><strong>Bonds<\/strong>: Investing in bonds is a popular way to hedge stock investments. Bonds provide a steady income stream, and their prices tend to move in the opposite direction of stocks. Investing in bonds can help to protect your stock investments from drops in the stock market.<\/li>\n","innerContent":["\n<li><strong>Bonds<\/strong>: Investing in bonds is a popular way to hedge stock investments. Bonds provide a steady income stream, and their prices tend to move in the opposite direction of stocks. Investing in bonds can help to protect your stock investments from drops in the stock market.<\/li>\n"]},{"blockName":"core\/list-item","attrs":[],"innerBlocks":[],"innerHTML":"\n<li><strong>REITs<\/strong>: Real estate investment trusts (REITs) are a type of investment that allows investors to invest in real estate without taking on the risk of direct ownership. REITs can provide a hedge against stock market volatility as they are less sensitive to market fluctuations.<\/li>\n","innerContent":["\n<li><strong>REITs<\/strong>: Real estate investment trusts (REITs) are a type of investment that allows investors to invest in real estate without taking on the risk of direct ownership. REITs can provide a hedge against stock market volatility as they are less sensitive to market fluctuations.<\/li>\n"]},{"blockName":"core\/list-item","attrs":[],"innerBlocks":[],"innerHTML":"\n<li><strong>Gold<\/strong>: Gold is a precious metal that can be used to hedge investments in stocks. Gold prices tend to move inversely to stock prices, so when stock prices go down, gold prices tend to go up.<\/li>\n","innerContent":["\n<li><strong>Gold<\/strong>: Gold is a precious metal that can be used to hedge investments in stocks. Gold prices tend to move inversely to stock prices, so when stock prices go down, gold prices tend to go up.<\/li>\n"]},{"blockName":"core\/list-item","attrs":[],"innerBlocks":[],"innerHTML":"\n<li><strong>Options<\/strong>: Options are contracts that give the buyer the right to buy or sell an asset at a predetermined price. Options can be used to hedge stock investments by allowing investors to protect themselves from price fluctuations. By purchasing a put option, investors can protect their stock investments from large price drops.<\/li>\n","innerContent":["\n<li><strong>Options<\/strong>: Options are contracts that give the buyer the right to buy or sell an asset at a predetermined price. Options can be used to hedge stock investments by allowing investors to protect themselves from price fluctuations. By purchasing a put option, investors can protect their stock investments from large price drops.<\/li>\n"]}],"innerHTML":"\n<ol class=\"wp-block-list\">\n\n\n\n\n\n<\/ol>\n","innerContent":["\n<ol class=\"wp-block-list\">",null,"\n\n",null,"\n\n",null,"\n\n",null,"<\/ol>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":[],"innerBlocks":[],"innerHTML":"\n<h2 class=\"wp-block-heading\" id=\"h-best-stock-hedging-strategies\">Best stock hedging strategies<\/h2>\n","innerContent":["\n<h2 class=\"wp-block-heading\" id=\"h-best-stock-hedging-strategies\">Best stock hedging strategies<\/h2>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Let's focus on assets that have historically gone up when stocks went down. We\u2019re going to look at traditional assets like bonds and alternatives like real estate and gold to see which is the best to hold during a market decline.<\/p>\n","innerContent":["\n<p>Let's focus on assets that have historically gone up when stocks went down. We\u2019re going to look at traditional assets like bonds and alternatives like real estate and gold to see which is the best to hold during a market decline.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":{"level":3},"innerBlocks":[],"innerHTML":"\n<h3 class=\"wp-block-heading\" id=\"h-bonds\">Bonds<\/h3>\n","innerContent":["\n<h3 class=\"wp-block-heading\" id=\"h-bonds\">Bonds<\/h3>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Based on our asset-correlation study, we found that bonds have had the lowest correlation to stocks monthly from 2018 to 2021. The correlation was -0.3380.<\/p>\n","innerContent":["\n<p>Based on our asset-correlation study, we found that bonds have had the lowest correlation to stocks monthly from 2018 to 2021. The correlation was -0.3380.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Bonds are considered low-risk assets because you\u2019re essentially lending money to a company or government that promises to pay it back with interest. For instance, Treasury bonds are backed by the full faith of the United States government. Treasury bonds tend to perform better during recessions because government-backed securities have a track record of being resilient assets.<\/p>\n","innerContent":["\n<p>Bonds are considered low-risk assets because you\u2019re essentially lending money to a company or government that promises to pay it back with interest. For instance, Treasury bonds are backed by the full faith of the United States government. Treasury bonds tend to perform better during recessions because government-backed securities have a track record of being resilient assets.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>One of the easiest ways to invest in a diversity of bonds at the same time is by investing in bond ETFs. Think of these as baskets of different bonds, including corporate, municipal, and treasuries, or a composition of bonds.<\/p>\n","innerContent":["\n<p>One of the easiest ways to invest in a diversity of bonds at the same time is by investing in bond ETFs. Think of these as baskets of different bonds, including corporate, municipal, and treasuries, or a composition of bonds.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>But remember, low risk means low return potential.<\/p>\n","innerContent":["\n<p>But remember, low risk means low return potential.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":{"level":3},"innerBlocks":[],"innerHTML":"\n<h3 class=\"wp-block-heading\" id=\"h-reits\">REITs<\/h3>\n","innerContent":["\n<h3 class=\"wp-block-heading\" id=\"h-reits\">REITs<\/h3>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Real estate investment trusts (REITs) invest in income-producing real estate like strip malls and apartment complexes. Regardless of what happens in financial markets, people are going to need homes, and businesses will need property to operate from.<\/p>\n","innerContent":["\n<p>Real estate investment trusts (REITs) invest in income-producing real estate like strip malls and apartment complexes. Regardless of what happens in financial markets, people are going to need homes, and businesses will need property to operate from.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>A study by the investment management firm Guggenheim Investments found that REITs had a moderate correlation of 0.68 to the S&P 500 between January 2011 and December 2021. This could mean REITs are good tools for long-term stock hedging.<\/p>\n","innerContent":["\n<p>A study by the investment management firm Guggenheim Investments found that REITs had a moderate correlation of 0.68 to the S&P 500 between January 2011 and December 2021. This could mean REITs are good tools for long-term stock hedging.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/columns","attrs":[],"innerBlocks":[{"blockName":"core\/column","attrs":{"width":"25%"},"innerBlocks":[],"innerHTML":"\n<div class=\"wp-block-column\" style=\"flex-basis:25%\"><\/div>\n","innerContent":["\n<div class=\"wp-block-column\" style=\"flex-basis:25%\"><\/div>\n"]},{"blockName":"core\/column","attrs":{"width":"50%"},"innerBlocks":[{"blockName":"core\/image","attrs":{"id":1928,"sizeSlug":"large","linkDestination":"none"},"innerBlocks":[],"innerHTML":"\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/2_83f2877e00-1024x714.png\" alt=\"\" class=\"wp-image-1928\"\/><figcaption class=\"wp-element-caption\"><em>Source: MoneyMade<\/em><\/figcaption><\/figure>\n","innerContent":["\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/moneymade.io\/learn\/wp-content\/uploads\/2025\/05\/2_83f2877e00-1024x714.png\" alt=\"\" class=\"wp-image-1928\"\/><figcaption class=\"wp-element-caption\"><em>Source: MoneyMade<\/em><\/figcaption><\/figure>\n"]}],"innerHTML":"\n<div class=\"wp-block-column\" style=\"flex-basis:50%\"><\/div>\n","innerContent":["\n<div class=\"wp-block-column\" style=\"flex-basis:50%\">",null,"<\/div>\n"]},{"blockName":"core\/column","attrs":{"width":"25%"},"innerBlocks":[],"innerHTML":"\n<div class=\"wp-block-column\" style=\"flex-basis:25%\"><\/div>\n","innerContent":["\n<div class=\"wp-block-column\" style=\"flex-basis:25%\"><\/div>\n"]}],"innerHTML":"\n<div class=\"wp-block-columns\">\n\n\n\n<\/div>\n","innerContent":["\n<div class=\"wp-block-columns\">",null,"\n\n",null,"\n\n",null,"<\/div>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Moreover, REITs must pay out 90% of their earnings to shareholders as dividends. You can invest in publicly-traded REITs as you would an ordinary stock through an online trading platform. REITs also exist as ETFs and mutual funds.<\/p>\n","innerContent":["\n<p>Moreover, REITs must pay out 90% of their earnings to shareholders as dividends. You can invest in publicly-traded REITs as you would an ordinary stock through an online trading platform. REITs also exist as ETFs and mutual funds.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>However, it\u2019s important to note that our study found REITs to have the highest correlation to stocks. This may have been due to how the pandemic triggered closures of strip malls and stores in which REITs invest in.<\/p>\n","innerContent":["\n<p>However, it\u2019s important to note that our study found REITs to have the highest correlation to stocks. This may have been due to how the pandemic triggered closures of strip malls and stores in which REITs invest in.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Our study also found that private REITs may be less correlated to stocks and thus better potential stock hedgers. But the barrier of entry is immensely high as they can only be sold to institutional investors. The best alternative to residential real estate is agricultural REITs because their correlation with CPI makes them excellent inflation-resistant assets fit for risk-averse investment portfolios.<\/p>\n","innerContent":["\n<p>Our study also found that private REITs may be less correlated to stocks and thus better potential stock hedgers. But the barrier of entry is immensely high as they can only be sold to institutional investors. The best alternative to residential real estate is agricultural REITs because their correlation with CPI makes them excellent inflation-resistant assets fit for risk-averse investment portfolios.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":{"level":3},"innerBlocks":[],"innerHTML":"\n<h3 class=\"wp-block-heading\" id=\"h-gold\">Gold<\/h3>\n","innerContent":["\n<h3 class=\"wp-block-heading\" id=\"h-gold\">Gold<\/h3>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Gold historically has been viewed as a hedge against inflation and bear markets. Our data found that gold is moderately correlated to the S&P 500. In fact, the price of gold soared as the market plummeted during The Great Recession. The precious metal again fared well during the COVID-19 recession as the price of gold reached an all-time high of $2,062.50 per ounce, making it one of the best investment commodities. And with fears of an upcoming recession permeating the news cycle, gold may shine once more.<\/p>\n","innerContent":["\n<p>Gold historically has been viewed as a hedge against inflation and bear markets. Our data found that gold is moderately correlated to the S&P 500. In fact, the price of gold soared as the market plummeted during The Great Recession. The precious metal again fared well during the COVID-19 recession as the price of gold reached an all-time high of $2,062.50 per ounce, making it one of the best investment commodities. And with fears of an upcoming recession permeating the news cycle, gold may shine once more.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>But how does one even invest in gold if you don\u2019t have a giant vault and a small army to protect it? While it\u2019s not as glamorous, you can invest in gold through gold ETFs. These are funds that aim to match the performance of the overall gold market. If you want to invest in gold directly, the easiest way is through an investing platform like Hard Asset Alliance.<\/p>\n","innerContent":["\n<p>But how does one even invest in gold if you don\u2019t have a giant vault and a small army to protect it? While it\u2019s not as glamorous, you can invest in gold through gold ETFs. These are funds that aim to match the performance of the overall gold market. If you want to invest in gold directly, the easiest way is through an investing platform like Hard Asset Alliance.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>So if gold moves high, you can win big. But be warned, you can lose if it doesn\u2019t. SPDR Gold Shares (GLD)\u2014a benchmark for the gold market\u2014has been down year-to-date.<\/p>\n","innerContent":["\n<p>So if gold moves high, you can win big. But be warned, you can lose if it doesn\u2019t. SPDR Gold Shares (GLD)\u2014a benchmark for the gold market\u2014has been down year-to-date.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>But as far as its resistance to a major market downturn like a recession, it may be too close to call.<\/p>\n","innerContent":["\n<p>But as far as its resistance to a major market downturn like a recession, it may be too close to call.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":{"level":3},"innerBlocks":[],"innerHTML":"\n<h3 class=\"wp-block-heading\" id=\"h-hedging-the-stock-market-with-options\">Hedging the stock market with options<\/h3>\n","innerContent":["\n<h3 class=\"wp-block-heading\" id=\"h-hedging-the-stock-market-with-options\">Hedging the stock market with options<\/h3>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>An option contract gives you the option (but not the obligation) to buy or sell a stock at a specific market price\u2014the strike price\u2014within a given time frame. An options contract is a great way to bet on the price of an underlying security, but they're also a fast way to lose money if you don't know what you're doing. For hedging purposes, let's focus on put options contracts.<\/p>\n","innerContent":["\n<p>An option contract gives you the option (but not the obligation) to buy or sell a stock at a specific market price\u2014the strike price\u2014within a given time frame. An options contract is a great way to bet on the price of an underlying security, but they're also a fast way to lose money if you don't know what you're doing. For hedging purposes, let's focus on put options contracts.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>A put option is the right to sell shares of an underlying asset at a determined strike price before the contract expires. During that time, traders can buy and sell the put options at a range of strike prices for a premium. The put options can be exercised when the current market price of the stock goes below the strike price.<\/p>\n","innerContent":["\n<p>A put option is the right to sell shares of an underlying asset at a determined strike price before the contract expires. During that time, traders can buy and sell the put options at a range of strike prices for a premium. The put options can be exercised when the current market price of the stock goes below the strike price.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Let\u2019s say you buy a company's stock at $20 a share. You're bullish and think it will go up, but you want some downside protection. So you pay a small fee called a premium to purchase a put options contract with a lower strike price of $15 that expires in one year. Eight months later, the stock price dropped to $12, but you can exercise your contract and sell the stock for $15 even though its market price is $12. In the end, you lose $5 instead of $8.<\/p>\n","innerContent":["\n<p>Let\u2019s say you buy a company's stock at $20 a share. You're bullish and think it will go up, but you want some downside protection. So you pay a small fee called a premium to purchase a put options contract with a lower strike price of $15 that expires in one year. Eight months later, the stock price dropped to $12, but you can exercise your contract and sell the stock for $15 even though its market price is $12. In the end, you lose $5 instead of $8.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Put options don't necessarily mean buying rising assets to offset losses as a hedging strategy, but are more of a way to mitigate losses from the asset itself\u2014like the stock that depreciated in our example. If you want to jump into options, you can do so through most brokerage accounts and trading platforms like TradeStation. You can also use them to buy a futures contract or just regular stock trading.<\/p>\n","innerContent":["\n<p>Put options don't necessarily mean buying rising assets to offset losses as a hedging strategy, but are more of a way to mitigate losses from the asset itself\u2014like the stock that depreciated in our example. If you want to jump into options, you can do so through most brokerage accounts and trading platforms like TradeStation. You can also use them to buy a futures contract or just regular stock trading.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Put options enable you to hedge against downside risk, but options trading also means taking on risks and is generally intended for advanced traders. Plus, you need to pay premiums for options contracts on top of the strike price. Premiums are generally higher for options contracts to trade stocks that are historically more volatile. In other words, the riskier the stock, the pricer it is to bet on the market price.<\/p>\n","innerContent":["\n<p>Put options enable you to hedge against downside risk, but options trading also means taking on risks and is generally intended for advanced traders. Plus, you need to pay premiums for options contracts on top of the strike price. Premiums are generally higher for options contracts to trade stocks that are historically more volatile. In other words, the riskier the stock, the pricer it is to bet on the market price.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/heading","attrs":[],"innerBlocks":[],"innerHTML":"\n<h2 class=\"wp-block-heading\" id=\"h-the-bottom-line\">The bottom line<\/h2>\n","innerContent":["\n<h2 class=\"wp-block-heading\" id=\"h-the-bottom-line\">The bottom line<\/h2>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Bear markets are a part of life. But historically, they have been short-lived. There have only been 14 bear markets since 1945, which translates to about one every five years. So this means that if you stray too far from stocks, you may not benefit as much from the gains. Some traders even buy put and call options at the same strike price, which is called a straddle.<\/p>\n","innerContent":["\n<p>Bear markets are a part of life. But historically, they have been short-lived. There have only been 14 bear markets since 1945, which translates to about one every five years. So this means that if you stray too far from stocks, you may not benefit as much from the gains. Some traders even buy put and call options at the same strike price, which is called a straddle.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>A study by the asset management company Hartford Funds found that Stocks lose 36% on average in a bear market. By contrast, stocks gain 114% on average during a bull market.<\/p>\n","innerContent":["\n<p>A study by the asset management company Hartford Funds found that Stocks lose 36% on average in a bear market. By contrast, stocks gain 114% on average during a bull market.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n<p>Overall, portfolio protection should enable you to weather the storm and hedge against stock losses. Consider the traditional stocks, bonds, and cash portfolios, but also look at assets that may not be correlated, such as real estate and gold.<\/p>\n","innerContent":["\n<p>Overall, portfolio protection should enable you to weather the storm and hedge against stock losses. Consider the traditional stocks, bonds, and cash portfolios, but also look at assets that may not be correlated, such as real estate and gold.<\/p>\n"]}],"_links":{"self":[{"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/posts\/1913","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/comments?post=1913"}],"version-history":[{"count":0,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/posts\/1913\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/media\/1927"}],"wp:attachment":[{"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/media?parent=1913"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/categories?post=1913"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/tags?post=1913"},{"taxonomy":"post_authors","embeddable":true,"href":"https:\/\/moneymade.io\/learn\/wp-json\/wp\/v2\/post_authors?post=1913"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}