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If you're trying to build wealth, sharp market downturns are your worst enemy. And today, they're happening far more often: in the last 18 years, the S&P 500 has experienced sixteen violent market declines. Institutions and professional investors have mastered powerful hedging strategies for dramatically reducing the risks of market volatility. Now, you can do it, too--and you can't afford not to. In Buy and Hedge, two leading investment experts show how to apply hedging as part of a long-term program for growing and preserving your assets. CNBC Fast Money guest Jay Pestrichelli and seasoned financial industry veteran Wayne Ferbert show how to systematically protect yourself against violent downward moves while giving your portfolio maximum room to run in upward markets. The authors' techniques are easy to use, can be applied to most investment vehicles, and require surprisingly little "care and feeding" once implemented. You'll discover how to:
· Take advantage of the hedge-building mechanisms built into low-cost index funds
· Invest in your ideas with confidence, because you've hedged the downside
· Systematically manage portfolios for risk as well as return
· Master and apply the "5 Iron Rules of Buy & Hedge”
· Use options to manage risk, not to create excess leverage
· Generate more dividends
· Effectively manage cash
Part I: Introduction to Hedging and the Markets 7
Chapter 1: Life Is a Series of Risk-and-Return Decisions–and So Is Investing 9
Chapter 2: Emotion Is Your Enemy, So Bid It Goodbye 15
Chapter 3: Don’t Forget Why You Invest
Chapter 4: The Investment Game Isn’t Rigged, But... 27
Part II: The Immutable Laws of Investing 33
Chapter 5: Capital Lost Is Capital That Cannot Grow 35
Chapter 6: Risk Is What You Buy; Return Is What You Hope For 41
Chapter 7: Emotion Is the Enemy 45
Chapter 8: Volatility Is Kryptonite 53
Chapter 9: The Taxman Cometh 61
Part III: The Five Iron Rules of Buy and Hedge 65
Chapter 10: Hedge Every Investment 67
Chapter 11: Know Your Risk Metrics 75
Chapter 12: Constructing a Long-Term, Diversified Portfolio 91
Chapter 13: Unleash Your Inner Guru 103
Chapter 14: Harvest Your Gains and Losses 109
Part IV: The How-To and Basic Tactics of Hedging 119
Chapter 15: Hedging with Options 121
Chapter 16: What Is an Option? 125
Chapter 17: Option Positions 133
Chapter 18: Understanding and Using Options 141
Chapter 19: Risk Graphs: A Picture Is Worth a
Chapter 20: Married Puts 165
Chapter 21: Collars 179
Chapter 22: Stock Replacement Tactic That’s Easy on Your Cash 193
Chapter 23: ETFs Will Look Great in Your Portfolio 205
Chapter 24: Portfolio Puts 221
Part V: Advanced Tactics 227
Chapter 25: Vertical Spreads 229
Chapter 26: Diagonal Spreads 249
Chapter 27: Managing the Cash in Your Portfolio 259
Chapter 28: Managing for Tax Efficiency 269
Chapter 29: Conclusion: Putting It All Together 277