By using an equal-weight ETF, you smooth out the volatility of the index better than if it were cap-weighted.
You will still lose money in a crash, but not as much, as the equal-weight ETF loses less than the SPY by a substantial amount in bear markets.
Second, buy the ProShares Short S&P 500 (NYSEARCA:SH). It’s as simple a hedge as it gets. It shorts the entire S&P 500 index. You can buy it, effectively permitting you to “go long a short position” without actually having to establish a short position in any stock or index.
The great thing about the ProShares Short ETF is that you can hold as much of it as you wish to hedge a specific amount of your portfolio. For example, if you own $10,000 in stock, and you are worried about a 20% correction, you could completely offset that correction by investing $10,000 in ProShares stock.
So if Jeremy Grantham is right about the coming crash, that’s how you fortify your portfolio.
This article is brought to you courtesy of Lawrence Meyers from Wyatt Investment Research.