3 of the Best Investments to Make During Extreme Volatility

The stock market spoiled investors last year with low volatility and outsized returns. In 2017, the Dow Jones climbed nearly 27%, while the CBOE Volatility Index (VIX) fell more than 34%.

Unfortunately, that trend has ended. Since peaking in January, the Dow has slipped 10%, while volatility has skyrocketed. The VIX is up almost 100% in 2018 alone.

That kind of volatility breeds fear in many retail investors. But it can also create a massive profit opportunity for those who know where to look.

That's why we're bringing you three of the best investments to make during times of extreme volatility.

Before we get to today's picks, here's why the markets have been so turbulent in 2018...

Market Volatility Has Been the Biggest Story of 2018

Since the correction began on Jan. 29, the S&P 500 lost about 12% before rebounding about 8%. The rebound was short-lived, and we're back near that 12% number.

Just this past Monday alone, the S&P 500 was down 2% at the open, only to close higher by 1%. That's a 3% swing in just one session.

It's enough to turn even the strongest stomach.

Why the volatility? Pundits can blame trade wars. They can blame the U.S. Federal Reserve and its rising interest rate campaign. And they can even blame the market itself, which was long overdue for a meaningful pullback.

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Indeed, the last 5% pullback happened just ahead of the election in 2016. The last 3% dip ended almost exactly one year ago. Forget about the last 10%. That was more than two years ago.

Despite several global technology companies getting hit by bad news all at once, the road to wealth is still paved by tech. That's what you will hear Money Morning Director of Technology & Venture Capital Research Michael Robinson say to his subscribers repeatedly.

In other words, some of the best tech companies went on sale this year. And as the Oracle of Omaha, Warren Buffett, believes, the time to buy is when other are fearful.

And they sure are fearful now.

Robinson says investors will be rewarded very handsomely for picking up some of the top names in tech right now.

However, because the news seems to be rife with problems for individual companies, the best investments are tech-focused exchange-traded funds (ETFs) that have solid histories of crushing the market.

You see, ETFs track baskets of stocks, which protects against major problems affecting any one of them.

And these are Michael's top three picks right now...

Best Investments for Volatility, No. 3:

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The First Trust Cloud Computing ETF (Nasdaq: SKYY) is perfectly positioned to take advantage of the $1 trillion shift from desktop computing and storage to the cloud.

It includes companies like Microsoft Corp. (Nasdaq: MSFT), now No. 2 in the cloud market, and cloud-hosting leader Amazon.com Inc. (Nasdaq: AMZN). This ETF will directly benefit from all the businesses moving everything to the cloud.

But there are 28 more stocks covered. One is IBM Corp. (NYSE: IBM) and its artificial, intelligence-driven Watson supercomputer platform. There's also SAP SE (NYSE ADR: SAP), a roughly $21 billion database juggernaut that's using the cloud to target clients well beyond its Fortune 1000 base.

And what would a cloud computing ETF be without Apple Inc. (Nasdaq: AAPL), Alphabet Inc. (Nasdaq: GOOGL), and Netflix Inc. (Nasdaq: NFLX)?

Over the past two years, it has gained roughly 80%. That's better than double the S&P 500's 34% gain over the period. And since the 2018 correction began, it beat the S&P 500 by nearly 5%.

Best Investments for Volatility, No. 2:

The ETFMG Prime Cyber Security ETF (NYSE: HACK) is the first true cybersecurity-focused ETF. It has invested in 47 companies whose primary business is cybersecurity. With the almost daily news of data breaches at large firms with which most of us do business, this is an important area for growth.

But this ETF still offers us some interesting diversification. Companies followed here include hardware, software, and consulting services used to defend against cybercrime. The ETF also has companies that focus on cybersecurity for aerospace and defense, IT services, and application software.

Aside from domestic and international newcomers, HACK includes some of the most established companies, such as Cisco Systems Inc. (Nasdaq: CSCO) and Symantec Corp. (Nasdaq: SYMC).

Over the past two years, it's up 77%, almost doubling the broader market. And since the correction began, it is crushing the S&P 500 by more than 13%.

Best Investments for Volatility, No. 1:

With the recent passage of the omnibus spending bill allocating $700 billion to the Pentagon's budget, it is a great time to focus on "miltech." The PowerShares Aerospace & Defense ETF (NYSE: PPA) fits this bill perfectly.

The fund has a solid mix of companies, including cutting-edge small caps like FLIR Systems Inc. (Nasdaq: FLIR), the world's predominant maker of commercial thermal-imaging cameras, and AeroVironment Inc. (Nasdaq: AVAV), a leader in drone technology that supplies the Pentagon with unmanned vehicles used for battlefield intelligence gathering.

However, its top 10 core holdings include many well-capitalized companies that have succeeded for decades regardless of Washington's defense budget battles.

Raytheon Co. (NYSE: RTN) is a diversified company providing systems for electronic warfare, laser rangefinders, military training, and advanced radar. Northrop Grumman Corp. (NYSE: NOC) offers products covering everything from advanced sensors, to missile defense, to cybersecurity.

This is another top-performing fund, with two-year gains of 62%. That beats the S&P 500 by 82%. And its performance during the current correction bested the S&P 500 by more than 7%.

There are several themes that need to be made crystal clear: Buy when everyone else is fearful. Buy tech. And spread the risk with top-performing ETFs.

Even if the daily ups and downs continue into the second quarter, these three plays will help you reach your goal of making enough wealth to sleep well at night.

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