Volatility Down Side.

There have been a couple of comments making reference to the use of double short funds to hedge. I do this for most accounts. One thing about the use of these funds to keep in mind is that as the market goes down the size of the the double short you own gets larger relative to the rest of the portfolio meaning it hedges more and more as the market goes down. If you take no action into a decline, and this post is not about whether you should or shouldn't, you will become more hedged. To use a simplified example. An account has $90,000 in SPY and $10,000 in the double short S&P 500 fund (which I own for clients). The market then drops 10%. The SPY is now worth $81,000 and the double short is now worth $12,000. $12,000 is obviously a much larger percentage of the total account of $93,000 (after the drop) than the $10,000 was of the total $100,000 before the drop. Keep in mind that this example is very simplified and that there is no guarantee as to what a double short fund will do. [ABSTRACT FROM PUBLISHER]