How to hedge against a large long-duration market crash?

Investing / Portfolios
6

Don’t hold the market, hold companies that grow earnings and are not overvalued.

This is admittedly harder in bull markets, but it works perfectly in bear markets or “lost decades”.

Looking at some companies in my portfolio that were publicly traded in 2000, here’s just starting alphabetically from the list:

  • Companies you could have picked and held until 2012:

    • Archer-Daniels-Midland: went from about 6 bucks to about 21 bucks (CAGR: 11%)
    • Bristol-Myers Squibb: went from about 30-40 cents to 24 bucks (CAGR: 40%)
    • etc etc

  • In companies (in my portfolio) you would have avoided:

    • Amgen: went from about 50 bucks to about 60 bucks (CAGR: 1.5%)
    • Cisco: went from about 50 bucks to about 12 bucks (CAGR: -11%)
    • etc etc

Back in 2000 Amgen and Cisco were already significantly overvalued while ADM and BMY were not.

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