What is the best ETFs portfolio for a bear market?

Question

Please give an example of 5 to 7 ETFs portfolio and explain why they will hold better in a bear market

Answer 1

There are more than a few ETFs that are specifically bear market oriented. These are actually designed to increase in value during a bear market, not hold better. I am not sure that is exactly what you are looking for. Are you instead looking for ETFs that are bull market ETFs but during a bear market will not drop in value so much as the average ETF?

Anyway, these ETFs should perform very well during a bear market.

QID This is designed to provide about 2x times the inverse of QQQQ. In other words as QQQQ falls $1.00 in price this goes up $2.00. So far this year it is down about 14%.

http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=162964

If I had to make an educated guess, it would be that this one will perform the best during a bear market.

Others of a similar nature are as follows:

DOG designed to be the inverse of the Dow 30. Up $1.00 when the Dow 30 drops $1.00

MYY designed to be the inverse of the mid cap 400.

MZZ a double inverse of the mid cap 400

PSQ an inverse of the QQQQ. Sort of like QID but only up one for every down one.

RWM an inverse of the Russell 2000

SKK a double inverse of the Russell 2000 growth. This one ought to be a good performer is a bear market.

Here is a link that contains all of your choices. Look for those that have short in their title. Those that have ultra short are the ones that are expected to increase 2x for every $1.00 drop.

Now if you instead are interest ETFs that are bull market oriented but not expected to drop as much as the average ETF in a bear market, maybe you might consider CSJ and SHY. These are short term bond index funds. They should hold up very well during a bear market. Pays about a 4.87% and 4.37% interest currently.

DVY will not be immune from a bear market but it should perform better than 95% because of the 3% yield. That should support the value.

I am not too sure about this one. Could perform ok in a bear market but maybe not. IEO It is oil production based etf.

Answer 2

In a bear market an accelerated return note is probably the best. You get 5 times the down side, with a “cushion” on the up side.

For example, you buy a 14 month note on the S&P with a cap of 50%, 5% cushion. If the S&P went down 5% in the 14 months, you would be up 25% (5 times 5)….if the S&P went down 12%, you would only be up 50% because that is the cap (5 time 12 is over 50%). On the other side, if the S&P went up 4%, you would not lose a penny, and get your investment back. If the S&P went up 10%, you would lose 5% of your funds…anything over that 5%.

They also do the same type of notes for bullish people, but there is no type of “cushion” for a bull note.

So the bear note, you are 5 to 1 on the “profit” and 1to 1 on the downside risk. The Bull notes are usually, 3 times the up side, and one times the downside.

This is a 3to2 option strategy that is used.

ETF’s will do the “exact same thing” but does not have to “extra return”. ETF’s are better in a bullish market because there is not a “cap” on how much you can make.

Answer 3

As there is no uptick rule with ETFs I think it would be better to think about shorting strategies rather than going long in any ETF in a bear market. Whichever you choose I think you are still swimming against the current. I think you should rather ask which ETFs would loose less money than others in a bear market? I would say some non cyclicals, pharmaceuticals, cosmetics and the like.

Answer 4

Great.... you're looking for investment advice from strangers that you can't verify their qualifications or motives.

Don't look for the "easy way" to invest. You'll get burned. Do your homework. Read a ton of stuff. Make your own decisions.

BTW: Did you know there are ETF's that are "bear" market instruments aiming at a 200% return on down markets (before internal fees and costs). This is not the stuff for newbe's (however).

Answer 5

DOG


its an etf that shorts stocks.