The stock market can be one of the most irrational places for the longest period possible.

Since 2012 and through the end of 2018, we have seen the volatility index remain at extremely low levels.

This makes portfolio protection extremely cheap. Irrationally, investors in this situation prefer to follow the masses and have a higher asset allocation towards eminently long positions. These assets have a VERY high correlation in periods of high volatility and cause our portfolio to suffer large drawdowns.

Cathie Woods has experienced this in her own ETFs when she has seen the largest inflows of capital coming into her funds the days before, making record highs (February 2021). Since then, her ARKK fund has declined by 60%.

"What the wise man knows before, the fool knows after."

This is well known to the fund managers, and we have seen how, since March 2020, they have started launching Tail Risk ETFs and Hedge Funds. But do they do the same job as good volatility management?

Man…