Here's a nice little article on how to use a downturn in the market to protect and profit! I think that one of these ETF's and a 15-to-20% allocation in the precious metals will do nicely in the event of a catastrophe.
How To Profit with Inverse ETFs
Last year, ProShares (www.proshares.com ) launched a series of ETFs that basically let you sell-short popular U.S. stock market indexes in order to hedge against - and profit from - a stock market correction.
Let's say you're bearish on the Dow, in spite of its record-setting high. You can now buy an ETF that's designed to pay off in gains if the Dow falls. In fact, should the Dow decline by 10% - your ETF should rise about 10% in value - delivering inverse returns to the market index.
And if you're a perma-bear , and really think the U.S. stock market is in trouble, there are a set of ETFs that give you double the inverse performance of the market index. So if for example, the Dow drops 10% - you should earn gains of 20%! Talk about doubling-down !
There are also ETFs that provide upside leverage on several leading stock indexes, so you can catch the market's rebound too. Plus, if you think a particular stock market sector is either over - or undervalued - you now have a convenient way to play that too.
Now don't get me wrong, I'm certainly not advocating that you begin day-trading these innovative ETFs, trying to catch every twist and turn in the markets. But as a smart way to hedge your other stock or mutual fund holdings against a potential market decline, inverse ETFs add a versatile tool to your investment arsenal. Call it correction protection for your portfolio!
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