Wednesday, July 28, 2010

Protect Your Portfolio with Bearish ETFs

Some investors have made some profits, want to hold on to their shares, but don't want to lose their gains if the market tanks. There are several ways of protecting a portfolio, including buying puts, shorting similar stocks, or just selling the stocks outright. However, there is an alternative, the bearish ETFs, also known as short ETFs.

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. To get more bang for your buck, there are over 40 bearish ETFs that are leveraged, according to These leveraged bearish ETFs cover numerous sectors, industries and sub-industries.

For example, if you own a lot of telecom stocks, you could by UltraShort Telecommunications ProShares (TLL) which was up 15.19% for the last three months. The ETF attempts to match twice the inverse of the daily performance of the Dow Jones U.S. Select Telecommunications index.

If you own a lot of mid-cap stocks, you could consider buying the Rydex Inverse 2x S&P MidCap 400 (RMS) which has a goal of matching the inverse daily performance of the Mid Cap 400 Index. The ETF is down 15% for the last three months.

For downside protection of a general portfolio, you could take a look at the UltraShort S&P500 ProShares (SDS) ETF which was down 13.22% for the latest three months. It tries to achieve twice the inverse of the daily performance of the S&P 500 index.

For a list of over 40 leveraged bearish ETFs, go to Jut be careful about investing in these, as they may not always perform the way they are supposed to. They are primarily designed for short term index tracking as opposed to long term tracking.

Author does not own any of the above.


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