Hedged Dividend Investing For Retirement

A new study from Rob Isbitts, the founder and chief investment strategist of Sungarden Investment Research suggests that it might be possible to have your cake and eat it, too. By combining traditional investing with alternative investing, or what’s called hedged dividend investing, you can generate income and preserve capital. Plus, you can have long-term growth and liquidity and do so without having to spend a fortune on this strategy.

In his study, he constructed an index (the Sungarden Hedged Dividend (SHD) index) with 80% allocated to the S&P 500 Dividend Aristocrats Index, an index which includes members of the S&P 500 that have increased their dividend payments each year for the past 25 years, and 20% allocated to a mutual fund — the Rydex Series Trust Inverse S&P 500 RYURX +1.02% — that aims to move in the exact opposite direction of the S&P 500 SPX +1.09% . And then he established a protocol for rebalancing the index; anytime the allocation moved outside a five percentage point threshold. And what he discovered is this: His SHD index outperformed the traditional 60%/40% allocation over 20 years, (8.65% vs. 8.2%) and other indexes, particularly on a risk-adjusted basis.

Source: Market Watch

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