Tax Reform in This Election Year: It's Not Likely
Which Credit Card Rewards Does the IRS Care About?For those who wish to hedge a portfolio against downside risk, Nate Pile suggests a pair of ETFs that benefit from a market decline. Here is the latest from his Nate's Notes.
"Although I would argue that much of the potential bad news has already been factored into stock prices, one of the mantras I have come to respect over the years is 'don't find the trend'... and the trend is currently down.
"Thus, I believe it would be foolish to not take at least a few cautionary steps with regards to protecting our portfolios until it becomes more clear just how bad things are going to get.
"As a result, I am recommending two 'short fund' ETFs as short-term investments -- ProShares UltraShort Dow 30 (AMEX: DXD) and the ProShares UltraShort QQQ (AMEX: QID). Both are designed to provide results, before fees and expenses, which correspond to the inverse of the performance of their respective indexes.
"The UltraShort Dow will move inversely to the Dow Jones Industrial Average while the UltraShort QQQ will move inversely to the Nasdaq 100. While both of these ETFs are already up significantly from where they stood just a month ago, they should continue to increase in value if the market does experience a serious meltdown in the months ahead.
"We caution, however, that these ETFs are double-edged swords that will make money in down markets, but lose it just as quickly in up markets ... and thus careful thought must be given before committing too large a portion of your assets to this type of hedge.
"For us, these ETFs are meant to be shorter-term investments, providing a hedged position of some sort until it becomes more clear just how dire the situation actually is regarding the health of the U.S. economy. The ProShares UltraShort Dow30 is considered a buy under $65 while the ProShares UltraShort QQQ is a buy under $52."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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