    

|
|
|
|
Portfolio Insurance
|
Portfolio insurance is a strategy used to reduce risk and protect stock portfolios against market declines. Portfolio insurance may entail short-selling stock index futures in a declining market, as opposed to selling the actual stock as it loses value. If the drop continues, an investor may repurchase the future at a lower price - using the profit to offset portfolio losses. Short-selling index futures as a form of portfolio insurance can offset any downturns, but could also hinder any gains. On the other hand, portfolio insurance may also entail purchasing futures in a rising market. Therefore, using portfolio insurance can be viewed as a hedging technique for a stock-only portfolio. Institutional investors often use portfolio insurance when they are dealing with a volatile or uncertain market. The ultimate goal of portfolio insurance is to prevent the value of a portfolio from dropping below a certain level. Of course, portfolio insurance is only effective if insured before the market declines.
Rate this portfolio insurance definition...
|
|
Where is the market headed? The answer may surprise you. Find out right now with the exclusive & Barron's recommended charts of Chart of the Day.
|
Popular Terms: EBITDA, liquidity ratio, 401a, deferred tax, command economy, 144a, per diem, margin rate, deferred revenue, required rate of return, cancelled check, open position, stock split, ex-dividend, implied volatility, in escrow, irrevocable trust, limit order, quality assurance, risk management, 1035 exchange, Key Rate Duration, class C shares, current ratio, Zero Cost Collar, 1031 exchange, wholly-owned subsidiary, VIX, reverse mortgage, retained earnings, phantom income, option premium, minority interest, labor relations, ex-dividend date, covered put, real GDP, LIBOR, inflation, dividends payable, diluted share, debt service coverage, balance sheet, APR, equities, average price per share, FICO score, FTSE, stock market close
|
|
|
|