This post originally appeared on RealMoney.com on Aug. 3 at 5:33 p.m. EDT.
Earlier today I talked about a melt-up in the markets, which may very well be in the cards. But I also told subscribers to my "
newsletter later in the morning that I was taking my entire portfolio to cash.
It was, admittedly, a shocking reversal to my recent stance on the markets and my views on longer-term investing. But the reason I moved to cash, as a manager of real money, as opposed to a model portfolio, centered on prudent portfolio management.
The "Market Movers" portfolio had gained roughly 47% since its inception through early this morning. In recent days, the portfolio was jumping 2% or 3% at the opening bell, quickening the pace of recent gains.
The stocks, in the aggregate, were rising at a better than 100% annualized rate. Those kinds of gains are too rich for my blood, even though I believe that all the stocks in the portfolio will appreciate significantly in the next two to five years.
Having said that, the volatility of the portfolio is often double that of the
, making it both difficult and expensive for me to protect my gains with hedges, whether it's selling S&P futures, buying puts or using ETFs.
I have found, through some expensive mistakes, that hedging cannot always allow you to hold on to profits during a market correction, nor can it protect historic gains from vaporizing over the remainder of the year.
Hence my decision today to go to cash and trade around the market until a point where I decide it is prudent for me to re-enter. I am highly likely to buy many of the same stocks back, particularly banks, homebuilders and a host of others. My move is not a referendum on the individual stocks in my portfolio or on the market overall.
It is, however, a conscious decision for me to lock in gains and use the proceeds to explore some trading opportunities in individual stocks I have been watching in recent weeks, or to trade the S&P, both long and short, until I decide that a full re-entry is warranted.
recommending that everyone follow my lead on this. For those who have longer-term time horizons, there's no need to do anything here.
As a portfolio manager, however, I believe it is incumbent upon me to protect my gains, especially since we have come so far, so fast.
Editor's Note: Citigroup (C) - Get Report, Wells Fargo (WFC) - Get Report, Bank of America (BAC) - Get Report, General Electric (GE) - Get Report, Lennar (LEN) - Get Report, Hovnanian (HOV) - Get Report and Verizon (VZ) - Get Report are among the stocks that Insana sold.. To follow Ron's trading in real-time you must be a subscriber to his "Market Movers" newsletter.
Ron Insana has returned to
as a senior contributor to the nation's premier business news network. Prior to his return, Insana was a managing director at SAC Capital Advisers, a $12 billion hedge fund run by Steven A. Cohen. Insana was the president and CEO of Insana Capital Partners, a $120 million fund of funds manager, from March 2006 through August 2008. For over two decades, Insana has been a familiar face on business television, spending 17 years as a veteran anchor at
. Before working at
, he worked as managing editor and senior anchor for the
Financial News Network
, where he began his career in 1984 as a production assistant. He graduated with honors from California State University at Northridge.