Here’s a new financial product that’s designed help you hedge your bets in rough markets. It’s called an Inverse ETF or Exchange Traded Fund. ETF’s usually mimic the performance of whatever market they are based on,whether it’s the TSX, the Dow, or a sector like oil. In this case, it does the opposite. Using an Inverse ETF is like selling the market short – it goes up when stocks go down. Howard Atkinson of Betapro Management says it’s suitable for small investors.
“They should be used by investors when investors are nervous about equity markets, when times do not look so positive like they have recently, and that will mean that on down days their portfolio isn’t going to go down that much.”
He says these should only be used as a portion of your portfolio to balance the risks in the stock market.
“You will not go down as much when the market goes down, you will not go up as much when the market goes up, so you’re not going to have as many fluxuations in your portfolio, and many investors feel more comfortable when they have a portfolio that doesn’t move around as much.”