These High-Yield Hedging Portfolios Are Beating the Market

‍

• Subscribe to my YouTube Channel HERE.

‍

As a rule, I don't love hedging strategies.

Why?

Because the stock market goes up 73% of the time.

And hedging strategies are painfully disappointing to trade when the market is going up.

When the market goes up, we want to be killing it.

And, remember, it's going up most of the time.

So a hedging strategy will be a killjoy a large percentage of the time.

But, every now and then, hedging becomes really, really interesting.

And we're clearly in one of those times.

But not only has 2025 been terrible for the stock market, there's not much hope for the future.

The Fed Chairman might get fired--creating a crash not seen in decades. Tariffs could be raised or changed--sending the market tumbling.

And there's always the impending doom of stagflation--which could cause underperformance for years to come.

Indeed, in times like these, hedging becomes very interesting.

So, what would that look like?

Here's my favorite way to hedge (if I were to do such a thing).

We've talked about it before.

I'd buy an inverse fund that throws off income. In other words, use an ETF that goes up when the market goes down, and produces income.

What's a good one right now?

YQQQ. It's the inverse of the Nasdaq:

It's been up and down, but it's up for the year. That's a lot more than SPY can say.

Then I'd pair it with something that produces income and also rises when the market rises (if it ever does again). A good choice for that is YMAG.

YMAG, of course, is down for the year like everything else.

And how is this simple combination doing from 1/1/25 through 4/21/25?

As you can see, through more than four months, this hedged portfolio is beating the market.

And it's producing income that's on pace for a 25% yield.

What does that mean?

It means we could reinvest our payments and potentially have more money than an index funder would have.

Or we could reinvest our money for a year and then have a nice payment amount coming in every month that we could use in real life, invest back into our account, or a combination of both.

Are there other ways to hedge? Absolutely. I'm working on several of those types of portfolios right now.

And there's a very similar portfolio that I've given out to Dividend Income Program Members that's doing better than the one we discussed:

It's down for the year but it's down much less than the market.

But there's one more thing we can do. We can add an inverse ETF that is more volatile and pays out more. This one is FIAT. How has this plus YMAG done? It's also beating the market:

Hedging is tricky business.

It feels great in times like this. It feels terrible in Bull Markets.

But if you want something that will beat the market overall and produce income we can actually use, there are some decent options.

‍