Inverse ETFs: Hedging downside risk

February 03rd, 2008 | Category: DJIA, Major Movement, S and P 500

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 poor news has already been factored into stock prices, one of the mantras I have come to respect by 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 not good things are going to get.

“As a conclusion, 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 supply results, before fees and expenses, which correspond to the inverse of the performance of their respective indexes.

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Original post by Steven Halpern

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