Going away for the holidays? “Vacation-Proof” your portfolio

By , on December 11, 2013


Traveling for the holidays? Take care of essentials before leaving. Photo from StockSolutions on ShutterStock.
Traveling for the holidays? Take care of essentials before leaving. Photo from StockSolutions on ShutterStock.

Holiday travel rises by 23% and the average duration away from home is 4 days, according to the USDOT. For the everyday investor, what do they do to protect their portfolio while traveling during the holidays?

Here are a few easy steps you can take before you leave to “vacation-proof” your portfolio.

1. Prune your holdings by selling – Use your upcoming vacation as motivation to prune your holdings. If there are winners you’ve been planning to sell, now’s the perfect time to do it. Also sell any assets that are going nowhere; that gives you a tax loss to offset your gains.

2. Set a limit – Set up a stop loss on any stocks in which you have significant holdings. If the price falls to that level, then you’ll sell automatically and avoid further losses. Stop losses can be set up through most online trading programs or through your broker. They’re a good strategy to have in place after vacation, as well; if the stock’s price rises you can raise your stop, so you always have an insurance policy protecting you against market reverses.

3. Replace your mutual funds with ETFs – You can’t set a stop loss on most mutual funds, unfortunately. That’s one of several good reasons to consider replacing your mutual funds with EFTs (Electronically Traded Funds) that cover the same segment of the market but can be bought and sold like stocks. The liquidity of EFTs also means you can get intra-day prices, instead of waiting till the market closes to see how much you won or lost.

4. Insure your portfolio with short-term options – Use short-term options as insurance against market surprises while you’re away. You can buy puts against stock indexes, for example, that will increase in value if the market goes down. And you can sell covered calls against the stocks you own to partially lock in today’s prices.

Enjoy your vacation… and don’t forget to turn off the coffee maker before you leave!

Donovan Lazar, general manger & professional trader for Online Trading Academy, is available to discuss in more detail about how to vacation-proof your portfolio.