At the beginning of each New Year, Seeking Alpha, the popular financial web portal, interviews Gary Gordon for its Positioning for 2015 series. Here is a transcript of that exchange.

SA’s Carolyn Pairitz (CP): How would your clients describe your investing style/philosophy?

Gary Gordon (GG): My clients would recite my mantra… There are four possible investing outcomes (i.e., big gain, small gain, small loss, big loss) and three of them are good. Successful investing is about controlling the investing outcome so that you ensure a big gain, small gain or small loss, and take action to avoid the big loss. The humongous loss is the only thing that can destroy a lifetime of wealth-building.

By way of example, I may own rental property in California where I live, perhaps for its capital appreciation potential as well as its annual cash flow. And along the way, I may experience price gains and dips, good renters and bad. But the one thing that my financial well-being would not be able to tolerate is an earthquake that decimates the property. It follows that, I may not enjoy paying the earthquake insurance premium each year, but I understand the criticality of doing so.

The exact same insurance principles go for investing in market-based securities. Stop-limit loss orders, technical trendlines, put options, non-correlated assets, hedges – no technique or asset type will eliminate downside risk completely nor appear particularly worthwhile in extremely bullish uptrends. Yet the tactical asset allocation decision-making to insure against the only thing that can kill a portfolio – the big loss – keeps my clients on track to achieve their financial freedom goals.

SA: Which global issue is most likely to adversely affect U.S. markets in 2015?

GG: Ironically enough, I have the same answer for 2015 that I provided in 2014’s interview: Deflation. Europe and Japan are both still struggling to beat deflationary pressures back; their 2014 efforts to stimulate their respective economies with asset purchases and negligible/non-existent or even negative overnight lending rates have pummeled their currencies more than anything else.

Indeed, the U.S. stock bull got knocked for a loop in October because of deflationary recession scares around the globe. So what did the U.S. Fed do? One of its committee members publically questioned whether or not the institution should even end QE3. Only then did U.S. large cap stocks rapidly recover from what might have been far worse than an intra-day 9.8% correction.

For better or worse, our market continues to rely on central bank manipulation. The Fed will be exceedingly “patient” in 2015, and may even decide by late 2015 to talk about ways to be accommodative yet again. They may have no choice. Consider the fact that, while Russia’s direct impact on the U.S. economy is small, the country matters a whole lot to Europe’s well-being. And Europe is reeling even without Russian woes. In essence, if world markets determine that the European Central Bank (ECB) is not aggressive enough with its stimulus, a region-wide recession would certainly drag on U.S. equities.

SA: Have any ETFs that have launched this year caught your eye?

GG: I like the work that Meb Faber does in the value space. The Cambria Global Value ETF (NYSEARCA:GVAL) is remarkably intriguing in theory, though I do not buy assets based solely on low P/Es or low P/S ratios. Russia started the year as the least expensive global equity market, and it only got cheaper. And then there’s the fact that I lived in Asia on and off for roughly 4 ½ years, so the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF(NYSEARCA:ASHR), which technically launched in 2013, has also been intriguing. Gaining access to stocks listed in China, the world’s second largest economy, is something that everyone should be thinking about.

SA: What do you hope to see from the ETF industry in 2015? Any product filings you are particularly excited to see launch?

GG: I anticipate interest in an exchange-traded vehicle that tracks the index that I created with FTSE-Russell, the FTSE Custom Multi-Asset Stock Hedge Index. Obviously, I hope to see it launch because it would be beneficial to me personally, but I am equally hopeful for those who want an alternative to shorting, leverage, inverse funds or T-bills.

Let’s be real for a moment. The U.S. economy cannot continue to accelerate if the world continues to decelerate. Investors cannot ignore the mountain of stock overvaluation evidence indefinitely, no matter how many rabbits the world’s central banks pick out of their collective hats. And periods of amplified exuberance always find themselves, later or sooner, at a place of heart-pounding panic. An exchange-traded vehicle for the FTSE Custom Multi-Asset Stock Hedge Index should reduce the anxiety associated with stock downturns.

SA: Could you please describe this stock hedge index in more detail? What was your process for developing it?

GG: My colleague and I started from a place where we investigated the currencies, commodities, foreign debt and U.S. debt (basically, all non-equity investments), that have a history of exceptionally low correlations to stocks. And then, in combination, demonstrate as close to the holy grail of zero correlation as possible. We looked at performance as well as fund flow movement in times of moderate to severe stock stress. Historically speaking, currencies like the dollar, the franc and the yen – all for very different reasons – have served as admirable hedges. Gold, more or less, had been the commodity of choice. Meanwhile, Japanese government bonds, German bunds and a fairly wide range of longer-maturity U.S. bonds worked remarkably well too.

To be clear, owning a fund that tracks this index, or choosing multiple assets to emulate it, is not meant for benchmarking a “bear fund.” Bear funds look to profit from short positions or the stock market falling. The FTSE Custom Multi-Asset Stock Hedge Index is designed to hedge against stock ownership and the risks associated with it. Similarly, owning a single asset like T-bill cash or a U.S. Treasury bond ETF alone does not offer the benefit of diversification across multiple asset avenues.

Only now, is multi-asset stock hedging even available in an index. And while it is most likely to perform well when stocks are not… this isn’t a prerequisite. For example, the FTSE Custom Multi-Asset Stock Hedge Index (through 12/15/14) was up 6.5%, even in a year when large-cap U.S. stocks have performed well.

SA: Going into 2015, which asset classes are you overweight? Which are you underweight?

GG: Remember, we use tactical asset allocation and we are not static buy-n-holders. We are currently overweight U.S. mega-caps through funds like the iShares 100 ETF (NYSEARCA:OEF) and the Vanguard Mega Cap Growth ETF (NYSEARCA:MGK), as well as U.S. minimum volatility through iShares USA Minimum Volatility ETF (NYSEARCA:USMV). And yes, I believe “low vol” is an asset class, though “low vol” by sector, not by the market at large. Otherwise, you own a whole of utilities and non-cyclicals, rather than a fairly well-distributed mix across the economic segments. I have also been picking through the energy rubbish bin.

On the debt side of the equation, much like 2014, we currently own bond assets that have relative value when compared to foreign debt. There is plenty of value in owning the Vanguard Long Term Bond ETF (NYSEARCA:BLV) and/or the Vanguard Extended Duration Treasury ETF(NYSEARCA:EDV). People may think that is nuts, but those are the same folks who completely missed the 2014 boat. So let me toot my own horn on this one, I was one of the very few who said rates would go down, the yield curve would flatten, and that these funds would be big time winners. We also own muni debt via the SPDR Barclays Municipal Bond ETF(NYSEARCA:TFI) as well as closed-end funds like the Blackrock MuniAssets Fund (NYSE:MUA).

I have been underweight small caps, foreign, emerging since July of 2014. And while I own held-to-maturity high yield bond investments in the Guggenheim Series, in general, widening credit spreads have made me steer clear of high yield bonds.

SA: What advice would you give to a ‘do-it-yourself’ investor in the present investing environment?

GG: Be mindful of where things stand. We are talking about the fourth longest bull market since 1897. The other three? They did not make it past eight years. Either we will break records with this bull market, or more likely, we will see a bear market in 2015 or 2016.

The problem is not participating in stocks during periods of amplified exuberance and overlooked overvaluation – that’s how money was made in the ’90s and in the mid-2000s. So you should definitely participate. The problem is failing to take action to minimize downside risks – that’s how investors got creamed in 2000-2002 and 2008-2009. Whether someone does it for you or whether you do it yourself, you must have a plan to avoid the bulk of an upcoming disaster.