Even the most conservative portfolios come with risk, including Q.ai Invest’s AI-backed investments. And while we can’t eliminate losses entirely, we’ve developed a hedging strategy to help investors guard against unnecessary market volatility – and effectively doubled your options in the process.
Enter: Downside Protection, courtesy of the deep-learning algorithms that put the “AI” in Q.ai.
For the average person, plunging into a new investment strategy is not a decision to be made lightly. Taking any position in the market inevitably comes with some level of risk – and how much you’re comfortable with determines how much, and in what, you can readily invest.
Q.ai is here to serve investors seeking a variety of modern, risk-adjusted investment strategies backed by deep-learning algorithms. And for those who like the idea of a pocket-sized robo-advisor but need a little more protection, Q.ai has just the strategy for you: our new account-wide Downside Protection option.
Welcome to hedging…AI-style.
What is Hedging?
Hedging is a strategy that attempts to limit the risk that market volatility introduces to your portfolio.
One of the most common, albeit advanced, hedging strategies involves making an offsetting investment in a security you already own. For instance, you might go long on Apple stock if you think they’re about to jump but take a short position via an Apple-based derivative, such as an option or futures contract (just in case).
Another strategy that’s more familiar to retail investors is the process of diversification. A diversified portfolio aims to invest in a variety of companies, sectors, countries, market caps, or other segmentations to ensure that your money isn’t too concentrated in one area. That way, when one sector collapses, the rest of your portfolio can mitigate your losses.
Hedging in your portfolio is one of the easiest ways to reduce potential risk – at the expense of your potential gains. That said, the average retail investor with a 401(k) or IRA doesn’t use hedging (beyond diversification, that is), as day-to-day fluctuations are typically less important than long-term growth.
But if you’re looking to invest beyond your retirement accounts and a simple buy-and-hold strategy, or if you just want extra peace of mind knowing that your money is as safely invested as possible, hedging is one way to minimize loss of wealth from sudden market volatility.
And for those investors, Q.ai is introducing a new product: our account-level hedging strategy.
Q.ai’s Investment Strategies
Q.ai’s AI-powered robo-advisor uses deep-learning algorithms to manage your money within one of four investment strategies. Each of these is designed to support different levels of risk (and reward) based on the underlying investments.
- The Value Vault uses advanced methodology to find the best value trades based on alternative metrics like economic value and EBIT/EV yields. With a focus on portfolio concentration, security selection, value underperformance, and volatility, our Value Vault generates a moderate risk level for investors.
- Our New Tech Economy strategy is all about tech: tech stocks, tech ETFs, and cryptocurrencies galore. While you’ll take on aggressive risk and higher volatility, our AI manages sector concentration and sharp sector rotations to buy and sell the best tech stocks weekly on your behalf.
- Diversify & Thrive is all about global macro investing. With multi-asset exposure, interest-rate volatility, and currency and commodity volatility all accounted for, our AI invests in everything from stocks and bonds to forex to oil and gold to build a conservative risk level for the diversified investor.
- If you’re looking for a moderate risk level with sharp factor rotations based on the leading factor ETFs, then The Tactician is for you. Nothing too exciting or flashy – just AI-powered investment management that maneuvers the markets the way Tom Brady navigates the football field. That’s all.
To Hedge, or Not to Hedge?
However, even the most conservative portfolio comes with some risk. And while we can’t eliminate losses entirely, we did develop a hedging strategy to help our investors protect their downside risk – and effectively doubled our strategy offering in the process.
Like everything else Q.ai offers, the hedge is entirely AI-based, and will be activated when our AI predicts that the S&P 500 is headed for negatively weekly returns. Investors who opt to turn on “Downside Protection” – aka hedging – will minimize volatility in their portfolio without having to lift a finger (after pressing the first button, at least).
But keep in mind that, while our Downside Protection is designed to prevent your performance from tanking, your returns won’t skyrocket, either. Instead, Downside Protection will safeguard your returns to keep them consistent, controlled – and there.
Which Q.ai Investing Strategies Come with AI-Backed Hedging?
Currently, each one of our long-term investment strategies has an associated hedge that investors can enable. In doing so, they’ll enjoy the benefits of our AI’s forward-facing predictions of coming market downswings.
That said, at this time, our hedging opportunity is not available granularly. As such, investors who switch on their Downside Protection will automatically switch any invested strategies from Without Hedge to With Hedge as an all-or-nothing option.
But as Q.ai is always innovating to keep our investors on the cutting edge, you never know what lies around the corner!
Why Does Hedging Matter?
It’s simple: academic research shows that stable, positive, compounded returns are associated with avoiding massive downdrafts – rather than chasing every major rally. And as the events of the last year have proven, public markets can go from relatively stable to volatile overnight, with little warning for investors to pull their hard-earned funds from tanking investments.
Hedging is no longer just for the big fish: the investors with all the cash and still, somehow, nothing to lose. By taking advantage of AI-backed downturn risk protection, you can generate stable, positive returns while maximizing your reward-to-risk ratios in any environment.
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