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The Best ETFs For A Stock Market Sell-Off

March 26th, 2013

new etfsBen Gersten: With fears of a market sell-off growing, you can survive a downturn if you know the best investments to make now.

For example, one way savvy investors navigate through volatile markets is by buying inverse funds.

Inverse funds enable you to make money when markets fall, while lowering your risk and protecting the value of your investments in the long run by smoothing out volatility.


Here are some of the best investments to make when the market’s about to slide.

The Best Investments for a Sell-Off

Investing in Inverse Funds & ETFs: The Rydex Inverse S&P 500 Strategy Fund (MUTF:RYURX) is the inverse fund recommended by Money Morning Chief Investment Strategist Keith Fitz-Gerald.

This mutual fund seeks to provide investment results that match the opposite return of the S&P 500. It has an expense ratio of 1.41%, which is not exactly cheap, but Fitz-Gerald says it’s worth it because of the strength of its management and because it’s been active since 1994.

If you’re looking for a cheaper inverse fund, check out the ProShares Short S&P 500 ETF (NYSEARCA:SH), which tries to do what the Rydex fund does but with a lower expense ratio, 0.89%. Note SH has existed only since 2006.

For more of a bang for your bearish buck, check out the ProShares UltraShort S&P 500 (NYSEARCA:SDS), which seeks to move opposite twice (200%) the daily movement of the S&P 500.

If you think the Dow Jones Industrial Average will sell off from its new highs, consider theProShares Short Dow30 ETF (NYSEARCA:DOG), which moves in the opposite direction of the Dow. You can double down on that bet with the ProShares UltraShort Dow30 ETF (NYSEARCA:DXD), which tries to move 200% opposite the Dow.

Other funds include the ProShares Short QQQ ETF (NASDAQ:PSQ), which moves inverse the Nasdaq 100, and the ProShares UltraShort QQQ ETF (NYSEARCA:QID), which seeks to move opposite twice the Nasdaq 100, an index of the 100 largest non-financial companies on the Nasdaq.

And to really bet on a crash, consider the ProShares UltraPro Short S&P 500 ETF (NYSEARCA:SPXU), the ProShares UltraPro Short Dow30 ETF (NYSEARCA:SDOW) and the ProShares Trust UltraPro Short QQQ ETF (NASDAQ:SQQQ) - all of which try to move three times the opposite of their respective indexes.

Finally, iShares Barclays 20+ Year Treasury Bond ETF (NYSEARCA:TLT) tracks U.S Treasury bonds with 20 or more years remaining until maturity. Historically, TLT has risen sharply when stocks sell off as investors seek safer returns.

But these aren’t the only good investments to protect against a market sell-off.

In fact, Money Morning Capital Wave Strategist Shah Gilani highlighted one in our Private Briefing investment service special report, “The Seven Investments You Have to Make in 2013.”

As Gilani explains, a market sell-off doesn’t mean your profit stream is dry – if you know where to turn.

“Successful investors understand that it’s possible to make money in every single kind of market…there’s always a way,” said Gilani.

Money Morning Executive Editor and Private Briefing Editor William Patalon III explains why a “crash insurance” pick like Gilani’s is necessary in this market environment. Check out the following video to learn more.

 



Money MorningWritten By Ben Gersten For Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially ; and a technological revolution even in the most distant markets on the planet. And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


NYSE:DXD, NYSE:SDS, NYSE:SH, NYSE:SPXU, NYSE:TZA


 

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