October 30, 2014

Make Money With Short ETFs in Tough Economical Markets

Global stock markets continue to crumble around us. With the latest news  regarding the default situation in Greece things look even worse. However, there is still a way to make money with ETFs. Short ETFs are a great way to make money while we are stuck in tough economical markets.

Precious metals – particularly silver and gold, are doing well and will continue to do well. However, there are also the short exchange traded funds like SUK2 for the FTSE, or SE2P for the eurostoxx that many investors are making money off of. There are also many US equivalents to these short ETFs.

Short ETFs can capture and monetize a falling stock market for even the most humble investor with just a few dollars in a brokerage account. This is if you do your homework and pay your cards right.

If markets resume their upward trend then this is a bad strategy. But how likely is this? Goldman is in the dock. Greece is causing a European bond crisis. The UK election threatens a hung parliament with no leadership. The Chinese economy is overheating. The US housing market remains in a depression that will get worse if interest rates rise courtesy of the Greek crisis spreading.

Since the bad news is that the United States economy – and most other economies around the world, are in the toilet, and will continue to be for a while, then using short ETFs to make some money is a great way to put some extra cash in you pocket and a great way to allow you to keep investing, even in these tough economic markets.

Short ETFs Explained By Seeking Alpha

Short ETFs are great new way to enable the average investor to get in on short selling stocks without all the hassle of knowing what the heck they’re doing. For some that can be bad, but for most it’s finally an easy way to get in on the action of making money even if the market as a whole is going down.

Exchange-traded funds are all the rage right now and for good reason. They trade on the open market just like shares of a company, but give you diversity like a mutual fund. The latest product in this ever expanding investment craze is the offer of “Short ETFs.”

Short ETFs are called such because they try to give the investor the opposite of the index or sector that they’re shorting. Seeking Alpha has an explanation of short and long funds straight from the CEO of ProFunds.

Basically, he says that having a fund of short sells on equities is a very risky practice. Instead, shorted funds through ProFunds tries to get the same effect by shorting futures contracts and swap agreements. Now I’m not exactly sure how that works, but it also sounds risky.

However, these funds seem to trend just as they should so who am I to think it sounds so difficult. One interesting shorted ETF is through ProShares and is the Ultrashort QQQ (QID). Now ultrashorts try to provide the investor with double the opposite of whatever it may be tracking, in this case, the NASDAQ 100. These can be a bit riskier and bit more erratic with huge moves from day to day depending on how the markets are trading.

Overall, these exchange-traded funds give the investor just another option to make money in any type of market, up or down.