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The cost of protection

A hedge is insurance with a premium. Over a long bull market the premium is the whole story.

1 idea that carry it

  • Post-mortemRiskLetter located

    The cost of protection, itemised: what a seven-year hedge actually cost

    A hedge is a premium paid every year; over a long bull market the premium is the whole story, so account for it as a cost from the start.

    Portfolio hedging decisions, insurance company analysis, and any discussion of tail protection.

    From Fairfax Financial's 2016 letter to shareholders · Prem Watsa