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Prem Watsa, chairman and chief executive officer of Fairfax Financial Holdings, answers a shareholders question during the annual general meeting at the Glen Gould Theatre in Toronto on April 15, 2008.Jim Ross

Fairfax Financial Holding's Ltd. CEO Prem Watsa says stocks, not bonds, will provide better returns over the next ten years.

But he still plans to keep Fairfax's stock portfolio entirely hedged for the time being, because he's worried that before the market goes up it could take another tumble within the next five years.

Fairfax has hedged its stock portfolio to the tune of more than 100 per cent, meaning it is essentially betting the market will go down. It will miss out on gains if the market rises, but will be protected if they fall.

Fairfax is now selling down its portfolio of treasury bills, which it had held for some time, Mr. Watsa told shareholders at the company's annual meeting in Toronto on Thursday.