Thursday, September 18, 2008

How to Make Money in a Falling Stock Market (without shorting, without puts)

Many investors believe that we are in a bear market, and they want to profit from that situation. They may be afraid of shorting stocks, and with regards to puts, some investors don't understand them, and others just don't like the premium, the volatility, and the expiration. For some investors, Short ETFs are an alternative.

An ETF or Exchange Traded Fund is structured to track various stock indices or the inverse of various stock indices. Most are traded on the American Stock Exchange. Depending on the ETF, it may even pay a yield. Here are several ETF's which will rise when stocks drop.

Short Dow30 ProShares (DOG) has a goal of the inverse of the daily performance of the Dow Jones Industrial Average index. In other words, when the Dow drops, this ETF goes up. The fund has a yield of 2.53% .

Short Financials ProShares (SEF) goes up when the Dow Jones U.S. Financials index goes down.

Short MSCI EAFE ProShares (EFZ) goes up when the MSCI EAFE index goes down. MSCI EAFE is a stock market index of foreign stocks, Morgan Stanley Capital International, Europe, Australasia, and Far East.

Short MSCI Emerging Markets ProShares (EUM) goes up when the MSCI Emerging Markets index goes down.

Short MidCap400 ProShares (MYY) goes up when the S&P MidCap 400 index goes down. The fund has a yield of 3.55% .

Short Oil & Gas ProShares (DDG) goes up when the the Dow Jones U.S. Oil & Gas index goes down.

Short QQQ ProShares (PSQ) goes up when the the NASDAQ 100 index goes down. The fund has a yield of 3.13%.

Short Russell2000 ProShares (RWM) goes up when the Russell 2000 index goes down. The fund has a yield of 1.72% .

Short S&P SmallCap600 ProShares (SBB) goes up when the S&P SmallCap 600 index goes down. The fund has a yield of 2.68% .

Short S&P500 ProShares (SH) goes up when the the S&P 500 index goes down. The fund has a yield of 2.62% .

If you want to be really aggressive, you can consider investing in the UltraShort ETFs, which are structured to provide twice the return [or loss] from the movement in the index. You can also find an Excel database of short ETFs, which can be downloaded, sorted, and changed, at WallStreetNewsNetwork.com.

Author does not own any of the above.

By Fred Fuld at Stockerblog.com

1 comment:

Hillary said...

You mentioned Dividend Capital (DCT) in this article. Rumors are Prologis (PLD) could buy DCT soon. Any comments on what this would do to DCTs stock?