Investor's Library

Review of
Buy and Hold Hedge: The 5 Iron Rules for Investing over the Long Term

By Jay Pesterichelli and Wayne Ferbert

Reviewed by Karris Golden, President and COO, Wasendorf & Associates Inc.
(Traders Press Inc.®, W&A Publishing, SFO magazine)

The S&P 500 has experienced 16 violent declines in the past 18 years. According to authors Jay Pesterichelli and Wayne Ferbert, professional and institutional investors have weathered those upsets by using hedging techniques. In Buy and Hold Hedge: The 5 Iron Rules for Investing over the Long Term, the investment experts outline ways to use hedging as part of a long-term plan for growing and preserving portfolio assets.

"The (2008) market crash was precipitous and calamitous," they write. "Think about the investment decisions you faced with your portfolio."

Did you "curl into the fetal position and hope it would all go away"? Blame your investment adviser and demand results? Sell everything? Look for tax advantages among your investing losses?

"(O)f these four actions, the only one that was even modestly productive was the last one," Pestrichelli and Ferbert explain. At least, the investor who looked for tax efficiency from the losses might have saved himself a bit of money. But, it's hard to save on taxes when you don't have any gains to offset the losses. You can at least admire the person who tried to find tax efficiency for his / her "glass half-full" attitude.

Pestrichelli and Ferbert co-founded ZEGA Financial LLC, where they are the principals. Pestrichelli has 20 years of experience in business management, with 12 years in the online brokerage field. Ferbert has been in financial services for 18 years and 10 years in the online brokerage field.

The book begins by introducing the concept of hedging as it relates to financial markets, explaining risk-and-return decisions, psychology and other considerations. It goes on to cover investing laws, the rules of buy and hedge, the basics of hedging and advanced tactics.

In all, the book is a good, basic primer for anyone who wants to understand how buy and hedge works, simple ways investors can hedge their portfolios and common mistakes individual investors make.

"Maintaining a long-term outlook for your investments is a key success factor in a Buy and Hedge portfolio," Pesterichelli and Ferbert write. "However, we could easily rewrite this rule as 'Avoid having a short-term outlook.' The reality is that the benefits of a long-term outlook are as powerful as the problems resulting from a short-term outlook. Let's start by examining the destructive powers of a short-term outlook and then return to the advantages of a long-term outlook."

Buy and Hold Hedge isn't strictly for full-time money managers -- or those who want to become one. Instead, the bookcan be useful to anyone willing to educate him or herself using its straightforward, easy-to-understand distilling of sophisticated investing techniques.

More information and full details on this book are available at: www.traderspress.com