Your Own Hedge Fund Strategy - The 130/30 Play

The 130/30 strategy cashes in on both long and short stock plays in the market

. As we have brought out before, most investors (statistics show 80% of all investors) NEVER short Anything. Those statistics might change with fairly new "Inverse ETFs". However, the 130/30 play is one that hedge fund managers have been doing for years. With a little-known ETF, you can now easily do the same thing yourself.

First, let me explain what many hedge fund managers typically do with a 130/30 Strategy.

The first step is they buy an index of stocks like the S&P 500. It could be like investing in an ETF like SPY (which tracks the S&P 500).

Fund managers then short 30% of the stocks in the index that they feel most likely to decline. They don't just guess on these, but they check all the fundamental data, charts etc..

Selling the weak stocks in the index short, ideally can make the overall play stronger. Then they invest the additional profits from shorting stocks and invest it in the best stocks of the group (sort of an averaging strategy on the stronger companies - with profits that wouldn't have existed had they not shorted the weaker stocks in the index).

So what is the purpose of taking this position? It is intended to outperform a Long-Only Position, and it often does just that. You cash in on the stocks of an index that are in rally mode, and you also catch the equities of that index that are tanking!

This may sound like too much hassle, but the ETF mentioned has done it all for you.

Take a look at the ProShares Credit Suisse 130/30 ETF (CSM). Now you can easily profit from the strategy that many hedge fund managers have used for years! Just keep it simple and you can have your own hedge fund without all the hassles.

If you don't like the idea of setting up your own hedge fund, or investing in ETFs, you might want to learn how to trade binary options on them. Binary options are such a simple way to invest that many traders are flocking to them.

Binary options are not controlled by Wall Street - yet. They offer a nice alternative for many types of investments. The learning curve is slight for binary options. You just need a simple binary options course that can have you up and running quickly.

No matter what type of investment you plan to try, just keep it simple. When you fully understand the investment (which is much easier to do when you keep it simple), you will normally do better with it!

by: Doug West

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