Saturday, March 03, 2012

Thoughts on Investing from Forbes

Thoughts on Investing--New Rules of Money courtesy of Forbes

#5 Learn to Profit from Volatility

Volatility is not going away. The average daily closing value of the CBOE’s Volatility Index has nearly doubled since the mid-2000’s, and in 2011 the S&P 500 swung more than 1% in 75 trading days.

Turn volatility into profits.

One way is to hedge your portfolio by taking a 5% stake in a VIX futures fund like the iPath S&P 500VIX Mid-term Futures ETN.

Another way is to use the wild, seemingly irrational moves as a buying opportunities. For example, the earthquake and ensuing nuclear catastrophe in Japan caused a sharp sell off in solid US stocks, including Apple and Intel. Smart investors bought in.