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The Best Investments for a Market Sell-Off

With fears of a market sell-off growing, you can survive a downturn if you know the best investments to make now.

For example, one way savvy investors navigate through volatile markets is by buying inverse funds.

Inverse funds enable you to make money when markets fall, while lowering your risk and protecting the value of your investments in the long run by smoothing out volatility.

Here are some of the best investments to make when the market's about to slide.

The Best Investments for a Sell-Off

Investing in Inverse Funds & ETFs: The Rydex Inverse S&P 500 Strategy Fund (MUTF: RYURX) is the inverse fund recommended by Money Morning Chief Investment Strategist Keith Fitz-Gerald.

This mutual fund seeks to provide investment results that match the opposite return of the S&P 500. It has an expense ratio of 1.41%, which is not exactly cheap, but Fitz-Gerald says it's worth it because of the strength of its management and because it's been active since 1994.

If you're looking for a cheaper inverse fund, check out the ProShares Short S&P 500 ETF (NYSE: SH), which tries to do what the Rydex fund does but with a lower expense ratio, 0.89%. Note SH has existed only since 2006.

For more of a bang for your bearish buck, check out the ProShares UltraShort S&P 500 (NYSE: SDS), which seeks to move opposite twice (200%) the daily movement of the S&P 500.

If you think the Dow Jones Industrial Average will sell off from its new highs, consider the ProShares Short Dow30 ETF (NYSE: DOG), which moves in the opposite direction of the Dow. You can double down on that bet with the ProShares UltraShort Dow30 ETF (NYSE: DXD), which tries to move 200% opposite the Dow.

Other funds include the ProShares Short QQQ ETF (Nasdaq: PSQ), which moves inverse the Nasdaq 100, and the ProShares UltraShort QQQ ETF (NYSE: QID), which seeks to move opposite twice the Nasdaq 100, an index of the 100 largest non-financial companies on the Nasdaq.

And to really bet on a crash, consider the ProShares UltraPro Short S&P 500 ETF (NYSE: SPXU), the ProShares UltraPro Short Dow30 ETF (NYSE: SDOW) and the ProShares Trust UltraPro Short QQQ ETF (Nasdaq: SQQQ) – all of which try to move three times the opposite of their respective indexes.

Finally, iShares Barclays 20+ Year Treasury Bond ETF (NYSE: TLT) tracks U.S Treasury bonds with 20 or more years remaining until maturity. Historically, TLT has risen sharply when stocks sell off as investors seek safer returns.

But these aren't the only good investments to protect against a market sell-off.

In fact, Money Morning Capital Wave Strategist Shah Gilani highlighted one in our Private Briefing investment service special report, "The Seven Investments You Have to Make in 2013."

As Gilani explains, a market sell-off doesn't mean your profit stream is dry – if you know where to turn.

"Successful investors understand that it's possible to make money in every single kind of market…there's always a way," said Gilani.

Money Morning Executive Editor and Private Briefing Editor William Patalon III explains why a "crash insurance" pick like Gilani's is necessary in this market environment. Check out the following video to learn more.


Our 2013 best investments report is free to Private Briefing members. If you sign up, you'll not only receive Gilani's pick, but also the six other recommendations from our financial experts. They include a data-security stock that's poised for a possible 55% gain and a biotech stock that insiders themselves are buying.

Just go here to find out more about Private Briefing, and get our team's best investments list for 2013.

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