If you think the stockÂ market is due for a correction, you have another good choice beside selling your stocks.
Consider buying Exchange Traded Funds (ETFs) that go up when the market goes down.
They are similar to mutual funds, but they trade like stocks and usually (not always, so do your homework) have a lower expense ratio.
My friend Al D’Agosto, a financial planner with Maffe Financial Group in East Hartford and Avon, thinks ETFs that make money when the market or one of its segments is heading south are a good way to hedge your portfolio.
ETFs, especially the ones that are power shares (leveraged), can be real tricky. So do some serious homework before investing in them. Look into the possibility that some of these ETFs can zig when they are supposed to zag.
A couple of examples to check out: DOG, for the Dow 30; BGZ, large caps; SDS, S&P 500; SKF, financials;and QID, high tech (QQQQ).
D’Agosto says his “tea leaves” tell him that we might be due for a short-term correction.
He worries about what is going on in Washington, uncertain global monetaryÂ policies, and earnings expectations that are too high.
I don’t know if he is right or wrong, but I did hedge my positions with a couple of ETFs. And keep in mind, for every person who is selling a stock thinking its going down, there is another person buying it, equally believing its going up.
- Stock market drops: Relax, no time for panic selling, time to look for stocks, mutual funds or ETFs you want if we have a real correction
- Investing: Look into ETFs and Vanguard
- ETF Tax Traps: Watch Out For Currencies And Commodity Exchange Traded Funds
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- Investment advice: Be careful as the bulls run, time for caution
- Stock market rebounds: time to worry, consider taking some profits off the table, have $$$ left to buy in during correction