Have you ever considered exchange traded funds (ETFs) as a safe haven for your money when markets get rough? Sure, there are the old standbys, such as gold, to offer investors a calm harbor, but why not an ETF?
ETFs have emerged as a tool used for risk management when the stock market is turbulent, and they allow investors to access niche markets without as much of the crazy risk involved. Areas such as commodities, foreign markets and currencies. Even strategies such as short selling are options that ETFs are allowing individual investors these days. These were once places that most investors were unable to access easily.
Not only can ETFs provide unique coverage, they are also flexible, and offered with low fees, and risk reduction for portfolios, making them popular options during troubled markets, such as the current situation.
Even if an investor feels that the stock market is going to fall, there are inverse funds that can help manage that.
Ultrashort Financials ProShares (SKF) has gained 10% this year, and more than 66% over the past 12 months on a bet against the beat up banking sector, reports Jeff Cox for CNBC.
When looking for areas to take your money in rocky markets, you can best protect yourself by only investing in those funds that are trading above their 200-day moving averages. On the downside, you can protect any gains you’ve made by exiting when your fund drops below that mark or 8% off its high, whichever happens first. If you decide that you’d like to try a short fund, just make sure you know the risks before proceeding.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.