tailieunhanh - RMA Protecting Appreciation in Taxable Investment Securities and Portfolios with Hedging Strategies

Another scheme, prime bank notes are “fictitious and fraudulent instruments -- not backed or endorsed by any legitimate financial institution.” In other words, prime bank notes do not exist. 4 These “investments” are often marketed using an assortment of vague terms such as debentures, letters of credit, commercial paper, prime notes, bills of exchange; bank secured trading programs or loan roll programs. The sales pitch typically includes promises of unrealistic rates of return (., 150 percent) and discussions of Federal Reserve, European Bank or World Bank involvement. 5 In addition, the seller typically refers to the investment as secret, or available only. | Protecting Appreciation in Taxable Investment Securities and Portfolios with Hedging Strategies A Complete Thought Process for Investment Advisors and Trustees Mark a. Miller Mark a. Miller is president of Miller Capital Partners in Bloomfield Hills MI. mark@ Hedge A conservative strategy used to limit investment loss by effecting a transaction that offsets an existing Despite the price declines of many . stocks over the last few years many individuals and trusts have highly appreciated securities in their taxable portfolios due to the strong rise in stock valuations over the last 20 These stocks may be a large percentage of the overall portfolio concentrated positions or low percentage holdings worth large amounts. While this level of appreciation is wonderful for the owners or trust beneficiaries it needs to be carefully monitored and protected. For investment advisors and trustees that have full discretionary management power over taxable portfolios the exact nature of the duty to protect appreciated securities and portfolios is unclear but bound to be a growing point of interest contention and litigation 3 given the level of appreciation for many investment portfolios. There are a variety of factors to consider with the issues of diversification and preservation of appreciated securities. Consequently the duty to diversify and preserve or hedge against declines in asset values is almost always a facts-and-circumstances evaluation on a case-by-case basis. Yet there is a growing school of thought that investment advisors and trustees may now have a duty to understand the use of applicable hedging Once hedging techniques are understood they can be rationally discarded or implemented so as to achieve the most appropriate mix of risk and return for clients and trust beneficiaries. The purpose of this article is to explain the primary hedging strategies which are the most straightforward and conservative and provide