It always amazes me how the market and investment pundits always tell us to buy...buy and hold. They said buy when the DJIA was 14,000 and when it fell to 7,000, and they are still saying it.
What if you bought at 14,000 and sold, when wiped out, at 7,000? What do you do now?
Overall, most investors and investment managers fail to use a very simple technique of "renting" your investment portfolio in good times or bad, never taking a loss, but receiving a steady "rental" income from your portfolio.
Simply put, nobody knows where the market will be going, or when. Most investors hold on to their investments and ride the markets up and down.
The options markets which are rarely utilized by investors, provide a way to satisfy the needs of those who do not want to sell out, while providing a steady stream of income, every year.
All that has to be done is to sell an option (and get paid for it) to agree to deliver the shares of stock you own at a certain price ( a higher price). If the shares never reach that price, nobody calls the shares to be delivered, and you pocket the option price. The object is to do this over AND OVER ON YOUR PORTFOLIO so that a steady income is generated.
In this strategy, you can continue to hold on to your shares yet receive a "rental" income throughout the time you hold them. Slow but steady income of 2%--5% a month can be generated.
If on the other hand, you are a market crystal ball reader, and believe that it will decline, or your particular shares will decline, yet you still want to hold them, the other way to take advantage of the market decline is to "sell-short" your shares at the present price and then deliver them to the buyer at a lower price point.
Contact your favorite broker to get a better explanation of the processes that may be available to you in these uncertain times to protect your portfolio.
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