Greg Madison: There are events unfolding right now that show you need to know how to invest in a market correction…
First, this bull market – the most unloved bull market in history, according to Money Morning Chief Investment Strategist Keith Fitz-Gerald – has continued for 54 months now. That’s a full 11 months longer than the average bull market run since 1953.
Second, the forces keeping this bull market going are almost completely divorced from any economic reality.
Unemployment and underemployment – the sheer number of Americans who’ve flat out given up looking for work – remains appallingly high, at 14%. Economic growth, limping in at under 2% per year, is anemic.
Yet, the markets have surged for more than four and a half years… hitting as high as 15,628… shattering all records as they go.
Now market crash indicators like the Hindenburg Omen - the only “crash talk” worth trading, as Fitz-Gerald told us last week – are alerting investors to prepare now. And the rising yield on 10-year Treasuries could trigger a selloff.
But a market correction, crash, or downturn is nothing to fear if you know how to invest for that scenario. A good investor is prepared to stay in – and make money in - any market.
In fact, the only sure way not to make money is to be out of the market.
So, here’s where to start.
How to Invest When Markets Fall
Inverse exchange-traded funds (ETFs) can be a powerful hedge against a downturn or crash. Even more than a hedge, they can be a tool to make money while everyone else is losing theirs.
Bearish investors nowadays have a truly staggering array of short plays to make using ETFs. If you can think of it, there’s an inverse ETF to short it: commodities, market cap ranges, precious metals, indexes, entire sectors, whole national economies, currencies – nearly anything.
Inverse ETFs can be a bit more expensive than “traditional” ETFs, but they allow investors easy access to the short game, without the hassle and expense of maintaining a margin account.
If you’re expecting any of the major indexes to go through a correction, you would naturally target an inverse ETF. You can always use an ETF that returns a one-to-one inverse of the dailyreturn of whatever you fancy:
- ProShares Short QQQ (ETF) (NYSE Arca: PSQ) will return the daily inverse of the Nasdaq.
- ProShares Short Dow30 (ETF) (NYSE Arca: DOG) returns the daily inverse of the Dow Jones Industrial Average.
- ProShares Short S&P500 (ETF) (NYSE Arca: SH) returns the daily inverse of the S&P 500.
For more aggressive investors, or those with a higher risk tolerance, the UltraShort and UltraPro class of ETFs can provide multiples of the inverse of the Dow Jones Industrial Average, the Nasdaq, the S&P 500, and even the Russell 2000. (Word of warning – those considering leveraged ETFs would do well to remember that multiplied gains can turn quickly into multiplied losses.)(...)Click here to continue reading the original ETFDailyNews.com article: How To Invest In A Stock Market Correction With ETFsYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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