Although small-cap stocks fit into the philosophy of small and aggressive portfolio, it is observed that many small-cap stocks have peaked recently and stayed below for extended period of time. Therefore small-cap, mid-cap and large-cap stocks will make up portion of the portfolio. Options trading and short selling will be used as hedging for the stocks.
Leveraged ETFs are gaining popularity among individual investors and traders in recent years. The liquidity and leveraging power makes them suitable for speculative trading. Therefore the portfolio will comprise mainly of leveraged ETFs which be traded for short term profits.
Since there are stringent rules for portfolio liquidation in the case of wrong investment decision, the risk control allows maximum use of leverage for magnified gain/loss. Nevertheless, the risk of leverage will be reviewed periodically in order to avoid repeating the mistake that leads to the nearly wiped out of the portfolio during the financial crisis.
Since leveraged ETFs consists of regular as well as inverse indexed fund, hedging is not limited to option trading. Selection of ETFs and hedging strategy will be discussed in more details.
Above are based on stock trading experience in the past. It is believed to be optimal for a small portfolio with maximum growth potential. Since the stock market is very dynamic and financial products are evolving quickly, the trading strategy will adjust accordingly to match with market environment.
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