This Week…

We’re looking at tips for  managing your portfolio in a market crisis.

Our expert for this investor masterclass is Alex Gurevich, founder and CEO of HonTe Investments. A 20-year Wall Street veteran, Alex runs a rules-based systematic global macro strategy that aims to capitalize on the mispricing of global assets.

• “Mistakes or a failure to capitalize on opportunity is usually not the result of lack of intelligence,” he says. “It’s the failure to properly process information.”

In this issue, we’ll cover 3 things:

• How to prepare and protect yourself from a market crisis.
• How to successfully (or safely) navigate a crisis.
• How to embrace (and capitalize off) constant market uncertainty.

Let’s get started.

Welcome to the Game

Welcome to The Game of Investing, a bi-weekly newsletter bringing you “aha” moments and actionable lessons from Real Vision experts. No matter your level of expertise, markets are tough — which is why we all have to put in the work. Ultimately, the game of investing is a competition with yourself. Our mission is to help you navigate the path to success. Prepare to level up.

LEVEL 1  — Preparation is Protection

With the benefit of hindsight, it’s easy to look back on an intense selloff like March 2020 and think about all the things you could have done better.

It’s more difficult to understand why we make certain decisions.

Everyone makes mistakes in a crisis, but these events are also full of opportunity. The key is not letting our mistakes compound.

Log Your Decisions and Emotions

In addition to keeping a trade journal, Alex suggests detailing the motivations and emotions behind each decision. Doing this not only helps you analyze your decision-making quantitatively but also prepares you to respond quickly when other investors begin to panic.

Pre-Crisis Positioning Matters

When the COVID-19 crisis hit, Alex’s firm benefited greatly. But his success was long in the making…

Dating back to 2018, Alex was skeptical of the monetary policy driving markets. He began positioning his portfolio to outperform if market dynamics shifted — and did they ever…!

As an investor, it’s your job to put in the work ahead of time, so you’re ready to act when markets start moving fast.

Think Probabilistically

Sometimes, certain corners of the market are relatively slow to adjust to new narratives.

When COVID lockdowns began in China, Alex spotted an outsized risk-reward opportunity in the options market.

• “Options were grossly mispricing the probability of March rate cuts,” he says.

Other times, the flip side is true. When markets are pricing in extreme chaos, it could pay to take a slightly less pessimistic view.

Level 2 — Working Through a Crisis

At times of peak uncertainty, when volatility is surging and stocks are tanking, investors pay for protection no matter the price.

This is when we have to think in terms of probability. There is only ever going to be one end of the world.

Are you sure this is it?

Sometimes the Worst Case Scenario is Fully Priced In

“Regardless of how bad I think something can get, this is when I have to start putting on bullish trades,” says Alex.

This isn’t a suggestion to catch falling knives, but markets often turn around before the economy does. Waiting for total certainty means you’ll miss much of the move higher.

If you have the benefit of a long time horizon, buying during peak times of crisis can be a lucrative strategy.

Intermission — Welcome to the RV Marketplace

The RV Marketplace is officially open, with an a la carte menu of products from some of your favorite Real Vision experts ready to help you build your own personalized financial hub. 

The RV Marketplace is your place to connect with top financial analysts to find the services that match your specialized needs and interests. You’ll find exclusive deals from Beth Kindig, Andreas Steno Larsen, Brent Donnelly, Mish Schneider, and many more.

Stop by the RV Marketplace and have a look around. We’ll continue building out the offerings, so please let us know what you think.

Welcome to the RV Marketplace.

LEVEL 3 — Embrace Uncertainty

Whether you’re in a crisis or a relatively calm market environment, keep in mind that market regimes are constantly shifting.

“I think of regimes as what the market is most afraid of,” says Alex. “So we had a liquidity fear regime in March 2020, then an inflation fear regime and a rates fear regime after that.”

Crises End But Uncertainty Remains

Depending on who you listen to, what comes next will be a secondary inflation wave, recession, a populist regime, or some combination of it all.

What’s crucial is finding a viewpoint to understand prevailing market narratives.

Markets move fast during crises, but zooming out shows they’re simply moments of heightened uncertainty — and that’s exactly what you’ve been preparing for.

Next Time

Thanks for reading. In our next issue, we’ll do a deep dive into the world of FX markets — aka currency trading. 

See you then.

Have feedback on The Game of Investing? We’d love to hear it. Just email us at essential@realvision.com to share your thoughts.