Today, I finalize my series per your question, “Are there securities that go up when the market goes down?” During the 2007-2009 time frame, we saw that the S&P 500 dropped over 55 percent while all four Bear/Inverse funds performed as designed and were up a lot more percentage wise than the S&P 500 was down. Keep in mind that past performance does not dictate future returns.
How should one use these Bear and Inverse funds? My answer: “Very cautiously.” Many buy bond funds and discover how much they underperform during a bull market. Others buy inverse funds and learn how much they go down during a bull market. Either way, while protecting your downside by using either bond or inverse funds during bull markets, you have either an expensive opportunity cost or lose money until the bull market turns bearish.
The next time this condition repeats, then and only then will I consider buying Bear/Inverse funds that go up when the markets correct and allow me to profit when the market decides to take a plunge. I will also have protective stops to get me out, in case the market whipsaws back into bull territory.
Switching gears, it has been a privilege to write for this very prestigious e-paper for the last two plus years. Due to opportunities on a national level, this will be my last column. In addition, it is time for me to allocate more time for my personal investing and trading. To keep in contact, email me at thetraderseye@gmail.com.
Thanks again for the opportunity! Remember to plan your work, work your plan, and share your harvest!
Adios-David O. England
Source: davidoengland.com, stockcharts.com
Full Disclosure-I do not own any securities listed in this column.
DAVID O. ENGLAND is the founder of the “Market Minute” Radio Show, Eye on the Market Training Academy, and a retired Associate Professor of Finance at John A. Logan College. This information is presented for educational purposes only and not intended as financial advice. For questions, e-mail eyeonthemarket.com
