Shah Gilani: It’s easy to make money when stock prices rise.
Just invest in one of the 5,000 stocks listed on major exchanges or one of the hundreds of exchange-traded funds (ETFs) that are already available – with more being added almost every day.
But if you want to make money when the stock market crashes, it’s just as easy.
Maybe even easier.
Just buy shares in one or all of the four “investments” I’m going to tell you about today…
More Pain Means More Gain
Shorting strategies will allow you to cash in when stocks, bonds, or other assets fall in price.
Indeed, there are lots of ways to make money when things go down. But just knowing about the three most popular strategies to play price or market declines is enough for you to cash in on the next stock that plunges on disappointing earnings – or on the next bear market in blue chips.
Those three key “short-side strategies” are:
- Selling short, more commonly known as shorting
- Buying inverse ETFs
- Buying put options
Today we’re going to look at inverse ETFs.
Grabbing Profits During a Stock Market Crash
When I talk to investors, one of my main messages is that “there’s always a place to make money” – with any kind of asset… and in any kind of market.
And short-selling is a core piece of that belief.
In fact, investors who aren’t at least considering short-side trades are missing major profit opportunities – in essence, leaving lots of money on the table.
ETFs are packaged products that trade all day like stocks.
You can buy them… sell them… and short them.
And there are hundreds to choose from.
Inverse ETFs are a category of exchange-traded funds that do the opposite of what an underlying portfolio or index does.
When markets fall, inverse ETFs rise in value. And the steeper the market drop, the bigger your profit.
Here’s what I mean…
Outperforming “Mr. Market”
The “stock market” is a generic term for all stocks that trade on a specific market or exchange, in an index or across all exchanges.
Here in the United States, there are different measures – or representations – of what we think of as the “stock market.” The most popular measures for “the market” are indexes that track 30 stocks, 100 stocks, 500 stocks, or 2,000 stocks.
You know these indexes as the Dow Jones Industrial Average (a 30-stock index of blue-chip companies), the Nasdaq 100 (a 100-stock index with a tech focus), the Standard & Poor’s 500 Index (S&P’s broad index of 500 stocks), and the Russell 2000 (an index of 2,000 small-cap stocks).
If you think the stock market, as measured by the Dow, is going higher – and you want to make money on the anticipated rise in share prices – you can buy all 30 stocks in the Industrial Average. You can do the same thing with the Nasdaq 100, the S&P 500, or the Russell 2000.