Hedging out of stocks in a downturn

The fork in the road · two jobs

Dry powder is what Berkshire's ~$345bn in T-bills actually is: it preserves capital and earns ~4% while Buffett waits — it does not pop when stocks fall. A true hedge is a different animal: an asset you expect to rise because equities are falling. Buffett deliberately holds bills, not long bonds and not gold, because his goal is optionality, not a crash payoff.

Job 1 · dry powder (capital preservation)

If you just want your money safe and ready to redeploy, you want short-dated government paper or a money-market fund — near-zero duration, no equity correlation, a steady yield. The mechanics (the SGOV "sawtooth", acc vs dist, ex-dates) are covered in depth in the "How T-bill ETFs pay you" topic; below is just the shortlist with ISINs.

Also valid and not in a wrapper: IBKR pays interest on idle cash (above a ~$10k / €10k threshold, scaled by account size), or you can buy T-bills directly (type US-T in IBKR) and German Bubills / Schatz / Bobl — the literal euro counterpart to US bills. US-listed SGOV / BIL exist but EU retail brokers can't sell them (no PRIIPs KID) — hence the UCITS rows above.

The currency trap (dry powder)

The one model to hold for any USD instrument when you live in euros:

real return (in €) = USD yield  ±  EUR/USD move

The USD-vs-EUR yield gap is only ~1.5pts (≈3.8% vs ≈2.2%). EUR/USD routinely swings 5–10% a year — so the currency move dwarfs the yield difference. Picking US bills "for the higher yield" is really a dollar-bullish bet in disguise. And there's no free lunch: the forward market already prices the higher-yielding currency to weaken by the rate gap, so an EUR-hedged US-Treasury fund, after hedge cost, lands back at the euro yield anyway. If you'll spend/redeploy in euros and have no FX view, take the euro options and the certainty. Reach for USD only if you genuinely want dollar exposure.

Job 2 · a true hedge — gold vs. long Treasuries

If you want something that actually climbs in a crash, there are two classic choices and they fail in different ways. Long-duration Treasuries rally when rates fall in a flight to safety — but carry heavy duration risk (a 20y+ Treasury fund fell ~30% in 2022 when rates rose, right alongside stocks). Gold has no duration and no coupon, so rising rates don't mechanically crush it — but it pays no income and trades like a momentum asset.

When gold makes sense OVER bonds / Treasuries

1. The shock is inflation or currency debasement, not a growth scare. In 2022 inflation pushed rates up, so stocks AND long bonds fell together — the bond hedge failed exactly when needed. Gold, with no coupon to discount, held up.
2. You want zero rate/duration risk. That's the same reason Buffett holds bills not bonds — gold sidesteps duration entirely.
3. The fear is systemic / geopolitical / fiat distrust. Gold is no one's liability; a bond is a promise from a government. It isn't tied to any single country's monetary policy.

When bonds / Treasuries are the better hedge

1. A deflationary recession or pure growth scare where central banks cut hard — long Treasuries rally strongly (price rises as yields fall); gold's reaction is less reliable.
2. You want income while you wait. Bonds pay a coupon; gold pays nothing and costs you the TER. This is Buffett's explicit objection to gold.
3. You want a calmer, more predictable mark — gold near record highs has had sharp daily drawdowns even mid-rally.

Caveat for both: in a sharp forced-liquidation crash, gold and long bonds can fall withstocks in the first days (everything is sold for cash) — only bills truly stay flat. Gold tends to recover its stabilising role over longer horizons.

Gold · the instruments (allocated physical ETCs)

As with SGOV, the famous US gold ETFs (GLD, IAU) aren't sold to EU retail. In Europe single commodities are ETCs — debt securities backed by allocated physical bars. A handful dominate; all hold real metal at ~0.12%.

The usual default is SGLD or SGLN — both huge, liquid, allocated, cheap. On IBKR pick the EUR-denominated listing (e.g. on Xetra), not the GBP line on LSE, or you pay an FX conversion on every trade. ISIN is the only reliable identifier; the ticker changes by exchange.

The gold currency twist — why you usually DON'T hedge

Gold is priced in USD globally, so buying the "EUR line" of an ETC does not remove dollar exposure — the euro price just carries the EUR/USD conversion underneath. Here's the counterintuitive part for a safe-haven leg: leave it unhedged. When equities crash the dollar typically strengthens against the euro and gold rises — an unhedged position catches both. EUR-hedging strips out exactly the defensive USD kick you want in a panic. So unlike your cash parking (where you hedge to euros to kill FX risk), for a gold hedge unhedged is generally preferred. Hedge only if gold becomes a large allocation and you want to remove EUR/USD noise.

*Headline TER; the daily currency hedge adds the EUR/USD rate-differential carry on top, so the true cost of any hedged share class runs higher than the sticker.

Long-duration bonds · the rate-cut hedge

If your thesis is a growth scare / rate-cut cycle rather than inflation, long Treasuries are the purer play. These are volatile (that's the point — duration is what makes them rally), so size accordingly.

The DTLE EUR-hedged class removes EUR/USD noise for euro investors — sensible here, since (unlike gold) a flight-to-safety rally in US rates is the thing you're buying, not the dollar.

Avoid for a buy-and-hold hedge · IBKR-native gold

1. Spot gold XAUUSD (unallocated) — a general claim on a bullion dealer's metal, not allocated bars; carries counterparty/credit risk, a ~10bps carry fee, T+2, and needs metals permissions. The ETC is cleaner (ring-fenced bars, no derivatives permissions).
2. Gold CFDs (GOLD) — leveraged and relatively expensive on IBKR; not for a hold.
3. COMEX futures — for sophisticated use, physical delivery possible; overkill for a parking hedge.

Buying on IBKR / Trading 212 · sizing

1. Interactive Brokers. Paste the ISIN into search. One ISIN shows several rows — one per exchange/currency. Pick the row whose currency matches the class you want (EUR on Xetra/GETTEX; USD/GBP on LSEETF). The currency column tells otherwise-identical rows apart.
2. Trading 212. Paste the ISIN (or fund name); verify the ISIN on the instrument page before buying or adding to a Pie. T212 carries only a curated subset, so a specific listing may be missing — the Acc/Dist sibling or another-currency listing is often there instead.
3. Sizing. Gold of roughly 5–15% tends to improve a portfolio's risk profile; it complements rather than replaces stocks/bonds (it generates no income). Gold is near record highs with real volatility, so phasing in over time beats a lump sum at the top.

Golden rule on either platform: a name or ticker can map to several listings — always confirm the ISIN and currency on the instrument page before you buy.

Bottom line

Decide the job first. Want capital safe and ready to redeploy → dry powder (€STR / T-bills / short govt bonds), in your spending currency. Want something that pays off in the crash → a true hedge: gold if you fear inflation, debasement or a systemic shock (unhedged, ~5–15%), or long Treasuries if you fear a growth scare and rate cuts. They are not interchangeable, and the currency call usually matters more than the yield.

This is the framework and the mechanics, not a recommendation — not financial advice. The right vehicle and sizing depend on your horizon, your spending currency, and how much volatility you can carry. Yields/TERs are a June 2026 snapshot; check live figures before buying.

Further reading