Hello investors,

I often get asked the question about what one can do in a market pullback.  There are several things one can do:

  1. Tighten up stop losses
  2. Buy Contra-ETFs
  3. Short Stocks
  4. Buy put options (provided your share is optionable)
  5. Sell calls options on your shares to lower your costs (provided your share is optionable)
  6. Put 4. and 5. together – and implement a collar option (provided your share is optionable)
  7. Sell out and go to cash – yes – cash is a position

You may have seen several videos on this in the past provided by VectorVest in the VectorVest university.  It is certainly worth revisiting in the current market conditions.

I wanted to concentrate on 2. per above – that is to Buy Contra-ETFs.

First question you may have – what is a Contra-ETF / Inverse ETF?

To quote from invstopedia.com:

An inverse ETF is an exchange-traded fund (ETF) that is constructed by using various derivatives for the purpose of profiting from a decline in the value of an underlying benchmark. Investing in these ETFs is similar to holding various short positions, or using a combination of advanced investment strategies to profit from falling prices.”

You are effectively shorting the market without having to short any stocks or indices.  You buy the Contra-ETF just like you would any other share.  The only difference being – that as the share market goes down – the Contra-ETFs are likely to go up and vica-versa.

Currently in Australia – there are 2 Contra-ETFs:

BEAR

BBOZ

One would look to hold Contra-ETFs in a falling market and sell out of them in a rising market.  I got to work to investigate this further for Australia using VectorVest.

Have a look at the short video – where I have a look at these 2 Contra-ETFs to see how they respond to market downturns and market upturns.  In addition, I also cover the Contra-ETFs in the United States (where there are over 100 Contra-ETFs).

CLICK HERE TO WATCH VIDEO

Regards,

Russell.

 

DISCLAIMER: PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. YOU SHOULD CONSULT WITH YOUR LEGAL, TAX, FINANCIAL, AND OTHER ADVISERS PRIOR TO MAKING AN INVESTMENT WITH VECTORVEST

 

 

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