These are two ASX ETFs I would personally avoid buying in February, based on how I see 2026 shaping up.

BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR)

The BetaShares Australian Equities Bear Hedge Fund is designed to move in the opposite direction to the Australian share market on a day-to-day basis. If the S&P/ASX 200 Index (ASX: XJO) falls, the BEAR ETF should rise. If the market goes up, this fund should fall.

That structure makes sense as a short-term hedge during periods of heightened volatility or when investors are genuinely worried about a sharp market drawdown. But it is exactly why I would avoid it if you have a constructive view on equities.

Personally, I think the Australian share market could deliver something close to a 10% return in 2026. If that happens, the BEAR ETF is effectively positioned to lose money over time. Even modest but consistent market gains can be painful for inverse ETFs, especially when held beyond very short windows.

For me, the BetaShares Australian Equities Bear Hedge Fund is a tactical tool, not a long-term investment. If you believe the market's next meaningful move is higher, owning an ETF that is structurally betting against that outcome just does not make sense.

VanEck Australian Banks ETF (ASX: MVB)

I am generally supportive of parts of the Australian banking sector. In fact, I am a shareholder in Commonwealth Bank of Australia (ASX: CBA) and still view it as one of the highest-quality businesses on the ASX.

The issue with the VanEck Australian Banks ETF is concentration. The ETF gives you broad exposure across the major banks, and that is where I see the problem emerging.

While CBA continues to execute well, I am less convinced the same can be said for all of its peers heading into 2026. Margin pressure, slower credit growth, and higher capital requirements could weigh on earnings for some other banks, naturally restricting returns for the ETF as a whole.

Rather than owning the entire sector through the MVB ETF, I think investors may be better served by being selective or allocating capital to areas of the market with clearer growth or income tailwinds.

Foolish Takeaway

Neither of these ETFs is bad in isolation. They simply feel mismatched to the current environment and my outlook for the year ahead.

With markets showing signs of resilience and selective opportunities emerging elsewhere, I think February could be a better time to focus on funds positioned to benefit from growth, rather than betting against the market or tying returns to parts of the banking sector that may struggle to keep up.

The post 2 ASX ETFs to avoid in February appeared first on The Motley Fool Australia.

Investors put in the highest-ever amount of dollars into local ETFs in October, but some products fared far better than others.

A BetaShares report showed cash, bond and fixed interest ETFs featured prominently among the top 10 ETFs that saw the largest inflow of cash last month. 

This perhaps indicated some anxiety with investors about the US election result and sky-high share valuations.

Top 10 hottest Australian ETFs

ETF pioneer Vanguard dominated the top of the charts. 

Its Vanguard Australian Shares Index ETF (ASX: VAS), Vanguard Global Aggregate Bond Index (Hedged) ETF (ASX: VBND), Vanguard Msci Index International Shares Etf (ASX: VGS), and Vanguard Australian Fixed Interest Index ETF (ASX: VAF) collectively brought in about $478 million for the company.

But the most attractive fund of October, iShares Core S&P/Asx 200 Etf (ASX: IOZ), alone pulled in a stunning $326 million of investor funds.

Top 10 coldest Australian ETFs

At the other end of the charts, foreign assets seemed to go out of favour with Australian ETF investors.

The trend could be a validation of the successful suppression of COVID-19 in Australia while the northern hemisphere copped a third wave as it headed into the colder months.

iShares Edge MSCI World Multifactor ETF (ASX: WDMF), iShares MSCI South Korea ETF AUD (ASX: IKO), BetaShares US Dollar ETF (ASX: USD), iShares Europe ETF AUD (ASX: IEU) and Platinum International Fund (Quoted Managed Hedge Fund) (ASX: PIXX) all suffered significant outflows.

BetaShares itself had $34.8 million pulled out of its BetaShares Australian Resources Sector ETF (ASX: QRE), which was the 2nd highest amount.

It's often hard to pinpoint the exact reasons for outflows from a particular ETF, BetaShares head of strategy Ilan Israelstam told The Motley Fool.

"Investors will have their own motivations for increasing or reducing their positions," he said.

"On QRE in particular, our suspicion is that most of the selling was due to investors taking profits, given QRE was up around 34% from its lows in March."

Betashares and AMP Limited (ASX: AMP) recently closed down a trio of ETFs they jointly operate due to a lack of investor interest. Those funds will trade on the ASX for the last time on 4 December.

The last two months have been the only time in history that the Australian ETF industry saw more than $2 billion come inwards each month.

Local ETFs collectively manage $73.8 billion, which is another all-time record.

The post 10 hottest (and coldest) Aussie ETFs right now appeared first on The Motley Fool Australia.

Well, unfortunately, I have no easy answers as to whether there will indeed be another market crash in 2020 — no one does. But what I do know is that if an investor is worried about an imminent crash, there are certain steps one can take to protect a share portfolio if such a thing comes to pass.

3 ways to protect an ASX share portfolio in a market crash

Hoard cash

Cash is the ultimate defence against a market crash. While cash makes a lousy long-term investment (especially in today's low interest rate environment), it is also an investor's best friend in a share market crash. Not only does cash keep its value and liquidity in any market condition, you can also use it in a crash to buy ASX shares at cheaper prices. I don't ever 'switch' my entire portfolio to cash or vice-versa. But I do like to keep a varying percentage in cash at all times, depending on market conditions. If you're worried about a crash, increasing your cash position is one of the easiest ways to build a buffer.

Own strong ASX dividend-paying shares

One of the best things about a strong ASX dividend-paying share is the relative certainty of the income you're receiving. 2020 and the pandemic has made it especially hard for former dividend-heavyweights to keep the divideds coming this year. But they are out there. And receiving income during a market crash can be a great way of buffering your portfolio against paper losses, as well as giving you some cash to spend on cheap shares.

Hedge with ETFs

Exchange-traded funds (ETFs) are another way you can protect your portfolio against a market crash. Some ETFs are specifically designed for this purpose. The BetaShares Australian Equities Bear Hedge (ASX: BEAR) is one such example. It's designed (according to BetaShares) so that a "1% fall in the Australian sharemarket on a given day can generally be expected to deliver a 0.9% to 1.1% increase in the value of the fund (and vice versa)". There are other options too. Many investors like to hedge against a market rash with gold, either bullion, gold miners or gold ETFs like the ETFS Metal Securities Australia Ltd (ASX: GOLD).

These are both legitimate instruments to use, but I wouldn't recommend them for a beginner investor, as they can be quite complex to manage effectively.

Foolish takeaway

Although many investors would love to protect their share portfolios in a market crash, the unfortunate reality is that (like any insurance), protecting your portfolio usually costs you money if the market crash doesn't eventuate. Cash doesn't fall in value when the share market crashes, but it also doesn't rise when the markets do. And gold and inverse ETFs can fall in value if the markets rise. Remember, market crashes are part of the deal when it comes to investing. And they don't last forever.

The post 3 ways to protect your ASX share portfolio in a market crash appeared first on The Motley Fool Australia.

Failing to break past the 6,200 point barrier multiple times has now led to a steady decline in the market. For those investors holding ASX 200 companies in their portfolio, this can be a little daunting. Choosing the right hedge is important if you are looking for portfolio protection.

What is hedging?

A hedge reduces risk of the overall portfolio. Its kind of like having an insurance policy.

I think hedging is sometimes over-complicated in the market. This can be quite confusing, particularly for newer investors. One thing to understand is that a hedge is normally an additional investment. As investors, you have the ability to purchase certain assets that can 'offset' the risk of loss.

This is possible in all markets and all asset classes, not only shares. It's a concept that you can embrace and deploy to protect a portfolio without needing to sell your shares.

Of course, as any transaction imposes a potential tax impact or future impact, you should always consult an accountant and a financial advisor. However, generally, you can purchase these 'hedge' assets very easily and apply instant levels of protection. It's an effective measure when the market looks rocky.

2 popular exchange-traded funds (ETF) used for hedging ASX 200 share portfolios are: BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR) and BetaShares Australian Strong Bear Hedge Fund (ASX: BBOZ).

These ETFs are designed for slightly different purposes. So let's compare.

BetaShares Australian Equities Bear Hedge Fund

'Bear' is an appropriate name for a hedge fund used to combat a bear market.

Even when we aren't quite yet in a 'bear market', we can use Bear as a hedge against potential corrections.

About Bear

Bear aims to produce returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, Bear can be expected to be positive +0.9 – 1.1%.

This is a really interesting concept. Negative correlation means the effect will be the opposite of the market movement. I say this to make it clear that it works both ways. For example, if you were to purchase Bear in a rising ASX market, it would effectively lose value. This fund requires active management.

These are the top 3 uses for Bear:

Hedging

Protect portfolios from market declines. No need to sell your existing holding if you don't want to

Profiting

Astute investors will have worked out that if Bear increasing in value in a falling market, it can also be used for profit purposes. 

Convenience

Purchasing Bear units is simple and fast. You can purchase units the same way you purchase shares. 

BetaShares Australian Strong Bear Hedge Fund 

'Strong Bear' is also an appropriate name here. You have to hand it to BetaShares, their naming skills are up there.

About Strong Bear

Strong Bear aims to produce magnified returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, it can be expected to be positive +2 – 2.75%.

Therefore, active management is even more important for Strong Bear.

Investing tactics are more or less the same as for Bear above.

Deciding on Bear vs Strong Bear

One thing you will notice above is that the multiplier factor is different between our 2 bears.

• Bear – 1% fall in market produces +0.9 – 1.1%
• Strong Bear – 1% fall in market produces +2 – 2.75%

This multiplier is the key to making a decision.

• If you have a lot of cash ready to deploy as a hedge, you might prefer Bear.
• If you have less cash at the ready, you might prefer Strong Bear.

As Strong Bear has a higher multiplier factor, you need less cash in the fund to produce a higher return on the way down.

Foolish Takeaway

Negative correlation ETFs are avoided by investors at times, as they seem risky and are poorly understood. They just require you to pay a little more attention.

The great thing is that they can be purchased instantly, the same as shares. This means that you can purchase them on the day of a market crash, if you had to. If you prefer to be a little more prepared, they can be purchased ahead of time.

The number one thing to be aware of is that the market could move either way. 

The post Bear vs Strong Bear: Choosing the right hedge for your portfolio appeared first on The Motley Fool Australia.

The S&P/ASX 200 Index (ASX: XJO) has tried and failed multiple times to make it higher than 6,200 points. Before the March correction, the index rose as high as 7,200 points. Even with the recent strong rally following those lows of around 4,400 points in March, we are still sitting low. In fact, we are still a full 1,000 points or more below this previous high. 

One thing to note here is the unique complexity that coronavirus has brought with it. We have never seen a crash exactly like this one. Although stock market crash events tend to have some similarities, each one is absolutely unique.

We are seeing a huge amount of stimulus from our governments and even the most experienced investors are struggling to come to a consensus on market direction. Keep this in mind when trying to 'predict' the market.

Everyone has an opinion, however I believe the best thing for investors to do is simply be prepared for all possibilities. 

Things to consider

The S&P/ASX 200 Index

The Index is not a single company. The ASX 200 is made up of the top 200 companies listed on the Australian Securities Exchange, by float-adjusted market capitalisation. So when you are looking at the 'ASX 200' falling or climbing, just remember that this doesn't mean individual shares will rise or fall.

Small cap shares for instance, may not move with the ASX 200. The media often refers to the market falling or rising by a number of points. This is generally related to the ASX 200 Index.

Understanding what the index means will allow you to make more informed decisions.

The 6,200 point barrier

Now we have discussed the ASX 200 makeup, we can look at the points again. While the top 200 companies represent less than 10% of companies listed, they are certainly very important. With this in mind, we come back to the 6,200 point barrier.

The index has made five attempts to break through this barrier between 9 June and 25 August. It's interesting because if we apply the same logic to an index that we do to a share price, multiple rejection is never good. Its shows a lack of strength and an inability to gain ground.

To me, breaking above this 6,200 point level is critical for positive change. 

Compounding this doubt is the fact that for the last 2 weeks, the index has been steadily trending down and away from that barrier, in retreat.

Business and life is evolving

The world is changing and evolving. What we know today, may not apply tomorrow. We are seeing changes in the way people work, the way companies operate and the way we live our lives. We are in the midst of a digital evolution and it's affecting the whole planet.

It's hard to imagine but, whilst we are seeing certain industries struck down by the pandemic, such as airlines, others, like technology providers are thriving. It's a shift and a flow of both money and energy. Although we see increasing unemployment among traditional jobs, at the same time, there are also many technology companies advertising for multiple roles to handle the new workload. It's a changing game.

On another note, this changing landscape is adjusting what we think we know about the financial health of companies. For example, recently Premier Investments Limited (ASX: PMV) announced that sales were down 18% globally.

Normally, this would be a shocking piece of news for investors, however the Premier share price rose 12%. The reason for this was that although sales were down, net profit was actually up. As most of the brands in Premier's portfolio are retailers, the physical shops have had to close for lock downs. However, online sales have surged, accounting for more than quarter of total sales. 

It's a different game.

The reality of share prices

We regularly see the financial media comment on the over or under valued nature of share prices all the time. Every analyst has an opinion and a methodology for valuing a company – myself included. However, there is one very important thing to remember: A company is not its share price.

We might see prices crash, but remember that the company could very well still be trading normally. You could see prices surging and when you look at the company, you find it's not even making a profit.

If a company is surging with no profit, is it 'overvalued'? Perhaps, however I would also argue that if two people, a buyer and a seller, agree on a price, then that company may not be over or undervalued. It may just be 'valued' correctly at the time of trade.

It's an interesting question and I'm not taking anything away from true valuations or fundamental analysis. In fact, I trust and rely on fundamentals myself, however it's worthwhile being aware of the reality of a real-time market, like the ASX. The share price is what a buyer is willing to pay, at the time.

How to handle a potential stock market crash

Have a plan

The first thing to think about is who you are as an investor. A financial advisor may be the best person to help you personally understand your goals and objectives. Having clarity around your goals will allow you operate with a clear mind in a crisis.

Some investors will lose sleep at night if they see shares in their portfolio falling in value. If this is you, have a plan. Know what you are going to do ahead of time. Know what you are happy holding and what you would prefer to sell. It's important to think about your portfolio and positions ahead of time. It's also important to know how to log into your trading account!

Long-term investors tend to view short-term corrections as nothing more than a blip on the radar. If this is you, a potential crash may not faze you too much. However, you can always improve your position. One strategy you might consider is dollar cost averaging. This involves keeping a supply of cash available to purchase more shares at lower prices later, should you need to.

Another reason for a long-term investor to keep some spare cash around is to be able to take advantage of buying opportunities quickly. In the March crash, investors had a matter of days at the bottom of the market. It's worth being prepared to act.

Risk management is key

Having a risk management mindset is a great way to operate in a stock market crash. Be aware of the risks involved in your positions and understand the potential losses. Even if you're not an analyst, you can refer to past events to understand the risks of your holdings.

One thing you can do right away is check out how low the prices went in March this year for all your holdings. In the event of another crash, it's likely the market could revisit previous levels and even lower. Having a look at previous prices can help you to understand the potential impact.

For example, Afterpay Ltd (ASX: APT) fell from over $40 to $8.90 in the March market crash, losing approximately 80% of its value. If that were to happen again at today's value of around $73 per share, an 80% drop would mean prices could dip below $15 per share. This is not a prediction, it's just basic risk management. If a major crash occurs, we can expect companies which were heavily impacted previously to be significantly impacted again.

If you consider risk management ahead of time, you will be able to consider the possibilities and make less emotional decisions. It's certainly helpful to think about.

Look at ways to hedge your portfolio

Selling shares at the first sign of a correction isn't always the best default move. Apart from the disruption to the portfolio you have worked so hard to build, there is also the tax implications to consider. This is something to discuss with your tax agent to really understand the repercussions of transactions. 

One possibility you have to help prepare for a market crash, aside from keeping spare cash for further investment, is to add hedging to you portfolio.

Companies showing resilience

One example of hedging is to purchase more companies that stand up well during a stock market crash. For example, large grocery companies such as Coles Group Ltd (ASX: COL) fell less than 20% in the March crash (compared to 80% with Afterpay). Another example is technology provider and artificial intelligence leader Appen Ltd (ASX: APX). Appen fell around 40% in March, however bounced back quickly and has gone on  exceed all previous highs. Lastly, healthcare giant CSL Limited (ASX: CSL) fell a mere 25% in March while most of the ASX was bleeding. It has held ground well since then. 

Negative correlation exchange traded funds

In a previous article, I wrote about three exchange-trade funds (ETFs) you can use to hedge your portfolio in a downturn. The purpose of a negative correlation ETF is to inversely track the direction of a regular index, such as the ASX 200.

For example, BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR), which aims to produce returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, BEAR can be expected to be positive +1%. As you can imagine, putting some extra cash into this ETF can help to offset the paper losses on the main portfolio, should you choose to hold your shares in a crash.

For investors with a little less cash, or even those looking to make a little profit on the way down, you could potentially look to a negative correlation ETF that is 'magnified'. BetaShares Australian Strong Bear Hedge Fund (ASX: BBOZ) is one such fund. BBOZ aims to produce magnified returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, BBOZ can be expected to be positive +2.4%.

Foolish takeway

Facing the prospect of another stock market crash can be a little unnerving to say the least. However, being prepared, managing risk and looking for options to hedge your portfolio can really help. 

My suggestion is this, don't try to predict the market. Instead be prepared for all scenarios. Investing is what we love, so it doesn't make sense to stop doing it. What does make sense is preparation to ensure we can continue doing what we love well into the future.

A market crash is often required to keep the market healthy. Throughout history, the market has bounced back stronger and stronger each time. You can draw confidence that we will always recover, it's just a matter of time. Having a sense of awareness and being prepared can be the difference between panic and success. 

I hope this article has helped to guide you through the prospect of a potential crash. It's not that scary if we are ready for it! 

The post Is another stock market crash coming? appeared first on The Motley Fool Australia.

After a 10-year bull run, the year of the coronavirus will have taught many novice investors that the market can turn into a sea of blood very quickly.

But there is a way for investors to reap gains in a plunging market.

"Remember the Hollywood blockbuster 'The Big Short' where a bunch of investors made massive gains on the housing market crash?" Stake operations manager Sarhang Shafiq said.

"That's what it's all about – taking the 'short' or 'other' side of the market."

Traditionally, taking a "short" position was only available to professionals and sophisticated investors, as it would have required creating a margin CFD account or having a broker facilitate it. The risks were considered too much for the average retail punter.

These days, though, "inverse" exchange-traded funds (ETFs) have popped up to allow retail investors to easily take a contrarian position.

While they're not as abundant in the ASX as in the US, ETF provider Betashares has 3 local products available: Betashares Australian Equitiesbear Hedge Fund (ASX: BEAR), BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ), and Betashares US Strong Bear Hedge Fund ETF (ASX: BBUS).

These funds increase in value when the Australian or US market falls, and vice versa. 

The first one will rise roughly 1% for each 1% fall in the market, while the other 2 are leveraged to amplify the effect (about 2.4% for every 1% change in the market).

Betashares investment communications manager Richard Montgomery told The Motley Fool these products are for "experienced investors".

"These are not 'set and forget' investments – investors should keep an eye on their positions on a frequent basis."

Are inverse ETFs worth it?

Even though short trading is now very accessible through these ETFs, investors are warned to tread very carefully.

One big reason is that markets are expected to head upwards in the long term, so holding onto inverse ETFs for longer than necessary could result in losses.

That leads to the second question of when to purchase, and when to offload these shares.

"When would you decide to buy these potential hedging ideas? And when would you sell them to switch into shares?" said The Motley Fool's Tristan Harrison back in March, during the peak of the coronavirus panic selling.

"You could end up holding on too long to see the value fall again. You're having to make two calls which you could get wrong."

Montgomery warned that the Betashares products target negative market movements on a single given day.

"It's important to understand that the return over a period longer than one day will not necessarily fall within the target short exposure range, and that a Bear fund is not expected to hit a certain price at a specific index level based on previous performance.

"For this reason, the short funds are typically more suited to short-term strategies."

He also flagged the potential dangers of leveraged funds.

"There are the additional risks associated with gearing, which magnifies both gains and losses. Geared investments involve significantly higher risk than non-geared investments, and may not be suitable for all investors.

"An investment in a Bear fund should only be considered as a component of an investor's overall portfolio."

The post Are inverse ETFs risky or the best thing ever? appeared first on The Motley Fool Australia.

Here are 3 investing strategies to profit from a potential second ASX share market crash in 2020:

Hold alternative assets

ASX 200 shares are by no means the only asset class you should hold in a diversified portfolio during a share market crash. Two "safer" options are gold and cash. 

Investors looking for exposure to gold could consider miners like Northern Star Resources Ltd (ASX: NST), physical gold, or an ETF like Perth Mint Gold (ASX: PMGOLD).

Perth Mint Gold has a very low management fee of just 0.15%. Another great feature is that unlike many gold exchange traded products, PMGOLD can be physically redeemed for any of The Perth Mint's bullion coins and bars.

If you're particularly bullish on the safe-haven metal during a 2020 share market crash, investing in a gold miner should provide you with additional leverage to the gold price, meaning that you could have greater upside potential. However, with greater potential comes greater risk.

Cash is a great asset to hold for both optionality and peace of mind. More risk averse investors should hold some cash to give them the confidence to hold their growth stocks through any stock market turbulence. More aggressive investors can use cash to "buy the dip", which I explain in more detail below.

Buy a bear fund before the crash

Shorting stocks or the share market is my least favourite option to profit from a pull back. Why? Because it requires you to successfully time the market. Maybe you can, but I know that I certainly can't do that.

With that being said, if you have a sound understanding of economics or investor sentiment, this strategy can make you money. The easiest way to take a position like this is through an ETF like BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR).

Buy quality ASX 200 shares during the crash

You've heard my least favourite way to invest during a share market crash, now here is my favourite. Buy ASX 200 shares! If you remain fully invested, I would recommend dollar cost averaging a portion of each paycheck into the market. If you have cash waiting to be deployed, I still think that you should stage it into shares to avoid missing out on depressed prices.

In my view, you should look for high quality, profitable companies with strong balance sheets, and growth companies that have seen their lofty valuations cut more than their fundamental business. Perfect examples of these are CSL Limited (ASX: CSL) and ETFS FANG+ ETF (ASX: FANG).

Foolish bottom line

Over the long-term, high quality ASX 200 shares should continue to be a life changing asset to own. Potential share market crash or not, continuing to invest in the right businesses will stand you and your family in good stead.

The post 3 investing strategies to profit from a second ASX share market crash in 2020 appeared first on The Motley Fool Australia.

The ASX, along with international markets, has seen some amazing gains from its March lows to now, while the world suffers in the wake of the COVID-19 pandemic. The lack of market correlation to the state of the economy is a confusing notion. As an investor, it can be challenging to see the forest from the trees amid this unpredictability.

Even if you do expect further correction to occur in our market, selling your shares may not be your preference as this can result in paper losses (and gains) being realised. There is another way to protect yourself by using ASX ETFs as a hedge.

What is a hedge? 

While no one has a crystal ball, it can be comforting to know that you have options available to you if you want to hedge your ASX portfolio against the risk of further downturns. The concept of hedging is nothing new, but for those investors a little fresh to the game, here is one definition:

"A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security." – Investopedia.com

Essentially, if you are holding ASX 200 listed companies and are planning to retain your holding through a downturn period, you could also invest in an ASX ETF that is negatively correlated to the S&P/ASX 200 Index (ASX: XJO). This means that if your holdings were to drop in value, your ETF position is likely to rise. To me it is simple – hedging your portfolio means you can sleep a little better at night.

3 ETFs to consider for a potential downturn

The following ETFs have been included as they directly relate to the Australian and American markets. As in investor, if you purely hold shares on the ASX, the first two are likely to be more relevant to you.

It should be noted that a significant number of 'negative correlation' ASX ETFs are available to retail investors. If you are considering this strategy, it is worth conducting further research to understand all available options.

Australian Equities Bear Hedge Fund (ASX: BEAR)

BEAR aims to produce returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, BEAR can be expected to be positive +1%.

Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) 

BBOZ aims to produce magnified returns that are negatively correlated to the returns of the ASX 200. If the ASX 200 moves -1%, BBOZ can be expected to be positive +2.4%.

US Equities Strong Bear Hedge Fund (ASX: BBUS)

BBUS aims to produce magnified returns that negatively correlate to the returns of the S&P 500 Index, hedged to Australian dollars. If the S&P 500 moves +1%, BBUS can be expected to be negative -2.5%.

How to use these ETFs to hedge against a market correction

As an example, lets look at how we can hedge a $10,000 portfolio against another potential market correction. If you're concerned about a 10% fall in the market, you may wish to hedge 10% of your portfolio. In this case, you would purchase $1,000 worth of BEAR shares (standard negative correlation) or as little as $500 worth of BBOZ shares (magnified negative correlation)

The great thing about these ETFs is that you buy them the same way you buy shares on the ASX. This makes it extremely easy to hedge your portfolio quickly.

Now, you might be thinking that you could use these same ETFs to profit from a falling market, and you're right. While the context of this article is to discuss portfolio protection, it is possible that investing in bear market ETFs could also produce some profit when the market falls.

Foolish takeaway

Buying ETFs is no different to buying shares. Markets can certainly be confusing and 2020 takes the cake! Adding ETFs to your portfolio can offset some risk, provide profit in a falling market and maybe even help you sleep a little better at night.

The post 3 ASX ETFs to hedge your portfolio appeared first on The Motley Fool Australia.

Investors want to know how to protect wealth in light of these declines. What is the answer?

There are a few hedges that people like to use such as gold, bonds or utilising options – which can be done by the individual investor or by specifically-designed exchanged-traded funds (ETFs) like BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR) that are designed to go up when markets go down.

But I don't really like the above options. They generally have a management cost to own, and gold & hedged ETFs go down when the markets go up. Markets rise most years, so they'd be a drain on your returns in most years. No-one can truly predict when markets will go down. Bonds aren't bad, but they have fallen during this volatility and offer lower returns than shares over the long-term. 

When would you decide to buy these potential hedging ideas? And when would you sell them to switch into shares? You could end up holding on too long to see the value fall again. You're having to make two calls which you could get wrong.

So what are you supposed to do? 

The thing is, there's going to be volatility every so often. That's why people say shares are 'risky'. The last decade has been largely plain sailing for the share market. It won't be calm 100% of the time. 

The share market has returned 10% per annum including the bumps along the way.

You could protect your wealth by never investing in shares to begin with. Stick with cash. Then you'd never see your portfolio fall in value. But that would be very detrimental to your long-term wealth creation, particularly as inflation eats away at it and interest rates are now at all-time lows.

By trying to protect your wealth in the short-term you can end up causing a lot of pain to your portfolio in the long-term. You wouldn't sell your house or farm just because someone is offering a lower price for it this month. 

I don't mind the idea of holding onto some cash whilst waiting for better opportunities to present themselves. Cash is a good short-term measure for protection and to buy those shares at discounted prices. But over the long-term, it's best to be invested in assets that can compound your wealth for you. 

The post How to protect your wealth from heavy share falls appeared first on The Motley Fool Australia.

Whilst stock market crashes like this are painful on paper, I'm sure there are many people out there desperate to know how to take advantage of the current situation for long-term wealth creation.

Before we discuss how to profit from the current lows we are seeing in ASX shares, I'd just like to point out that the single worst thing you can possibly do is sell your shares at low prices. This 'locks in' your loss and doesn't give your shares an opportunity to ride out the storm (at least with you owning them).

But let's assume you've just dealt with the pain of having your portfolio decrease in value on paper.

How to make money in a market crash

There are a few ways that investors can try to profit from this kind of stock market environment.

You can go into 'hedge' assets like cash, gold or bonds.

For the latter two, there are easy ways to do this through exchange-traded funds (ETFs). Two that come to mind are the ETFS Physical Gold ETF (ASX: GOLD) and the iShares Treasury ETF (ASX: IGB).

But this is far from a perfect strategy. If you had done this before the crash, it would be ok, but I think the point of moving asset allocations right now is closing the barn door after the horse has bolted.

Another option would be to use 'inverse' ETFs like the BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR). ETFs like BEAR are designed to rise if ASX shares fall. But I think this is a niche strategy unsuitable for everyday investors and not one I would recommend.

In my opinion, the best way to make money during this time isn't by shifting asset classes or using complex ETFs. It's simply by buying good quality ASX companies for the rock-bottom prices we are seeing on the markets today.

This might not feel like the wisest use of your precious cash right now, but I think there are some deals being offered that would set up a portfolio extremely well in the months and years ahead. Some people are calling this crash a 'once in a lifetime' opportunity, so I think it's a great time to load the boat on your favourite companies. In my humble opinion, bravery right now will be handsomely rewarded in time!

The post Here's the best way to make money on the ASX during this crash appeared first on The Motley Fool Australia.

Concerns over the coronavirus and its impact on the global economy have ramped up in recent days. So, with domestic and global markets falling lower, how can you keep making an income from ASX shares right now?

If you can't beat them, join them…

If you're thinking that this is just the start, then you can still make some money as ASX shares fall lower. One solution is to buy a contrarian exchange-traded fund (ETF) like BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR). 

This BetaShares ETF has the goal to "generate returns that are negatively correlated to the returns of the Australian sharemarket". Another note on their website says it provides Australians with "a simple and cost-efficient way to profit from or protect their portfolio against declines in the market".

If ever there was a time to buy something like this, it would be this week. There have been billions of dollars of value wiped off ASX share valuations in the past week or so.

Meanwhile, the BetaShares BEAR ETF is up 11.49% since Thursday 20 February. While that could mean it gets results, it also may be that more investors are buying and boosting demand.

Buy high-yield ASX shares for more income today

One of the silver linings of a market correction is that dividend yields can jump on some ASX shares.

Take a look at Fortescue Metals Group Limited (ASX: FMG) for example. The group's dividend yield has surged into double digits and is sitting at 10.91% per year. The Fortescue share price has dropped 16.64% in the last month but that's far from the worst decline amongst ASX resources shares.

Buying something like Fortescue or an ASX gold miner like Saracen Mineral Holdings Limited (ASX: SAR) could be a good way to boost short-term income and get some value for money along the way.

The post How to make income from ASX shares in a market correction appeared first on The Motley Fool Australia.

But despite all this, there are still plenty of ways to protect your portfolio from a severe downturn in the economy. In fact, there are even some savvy investors who might find a way to turn a market correction into a money-making opportunity. Here are three ways you can reduce your portfolio volatility in a crisis, and possibly even still generate a positive return.

1. Inverse ETFs

Exchange traded funds (or ETFs) are pooled investment vehicles that trade on the stock exchange just like ordinary shares. Normally they are designed to passively track a benchmark or index, such as the overall performance of the top 50 or 100 companies listed on the ASX. The success of the fund is measured by how closely its performance replicates its chosen benchmark.

However, inverse ETFs are designed in such a way that they move in the opposite direction to their benchmarks. Betashares have a number of inverse ETFs that currently trade on the ASX, and they all bucked the downward trend on Thursday to deliver strong returns.

The Betashares Australian Equities Bear Hedge Fund (ASX: BEAR) is seeks to profit from a declining Australian share market by generating returns that are negatively correlated with the return of the ASX200.  It increased 2.7% on Thursday.

The Betashares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) is a riskier version of the standard Bear ETF as it uses leverage to magnify returns. It surged 6.8% higher in Thursday trading.

And for some international exposure, the US Equities Strong Bear Fund (ASX: BBUS) attempts to profit from declines in the US share market. It also jumped 6.5% higher on Thursday.

2. Gold

In times of market crisis, investors flock to safe haven assets like gold and other precious metals as these commodities tend to safeguard value. You can gain exposure to gold through gold ETFs such as ETFS Physical Gold (ASX: GOLD), or by investing in pure play gold miners.

The GOLD ETF increased by 1.2% on Thursday, while gold miners like St Barbara Limited (ASX: SBM), Evolution Mining Limited (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) also ended yesterday in the green.

3. Bond ETFs

Fixed income instruments like bonds are viewed as lower risk than equities. So when the share markets become volatile, risk-averse investors tend to dump their stocks and buy up bonds.

The easiest way for individual investors to trade in bonds is again through ETFs. There are loads of fixed income ETFs that currently trade on the ASX: same target higher yielding corporate bonds, while others focus on lower risk government debt.

For example, there is the Vanguard Australian Government Bond Index ETF (ASX: VGB), which does basically what it says on the tin: invests in lower risk government bonds. It also finished slightly in the green on Thursday.

Foolish takeaway

The above strategies can offer downside protection to your portfolio during times of market upheaval. But they are not without risk. When the share market is performing well, inverse ETFs will decline in value – and in the case of leveraged ETFs like Betashares Australian Equities Strong Bear Hedge Fund, these negative returns will be magnified.

However, these types of securities are great diversifiers, and if used in the context of an overall portfolio strategy they can help you rest a little easier when markets become volatile.

The post 3 ways to protect your ASX portfolio from a market correction appeared first on The Motley Fool Australia.

The unpredictability of the Trump administration, rising global interest rates, a strengthening US dollar, international trade tensions between China and the US, falling oil prices and signs of a slowing Chinese economy have created a litany of reasons for investors to feel nervous about a potential bear market.

Taking their cue from US tech giants like Apple, Amazon and Netflix, local tech growth stocks with high valuations have been hit especially hard. Since reaching 52-week highs back in late August or early September, market darlings like Afterpay Touch Group Limited (ASX:APT), Appen Limited (ASX:APX) and WiseTech Global Limited (ASX:WTC) have all suffered high double digit losses.

Even traditionally defensive healthcare stocks have been hurt by the global rout in equities. Blue-chip stocks Cochlear Limited (ASX:COH) and CSL Limited (ASX:CSL) are both nearly 20% off their September highs.

Blue-chip miners with Chinese exposure have had a subdued start to 2019, driven by weakening factory activity across Asia coupled with ongoing trade tensions between China and the US.

BHP Group Limited (ASX:BHP) and Rio Tinto Limited (ASX:RIO) both shed over 1.5% in the first week of 2019. And with more uncertainty on the horizon, 2019 could be a tough year for the big miners.

In these times of turbulence there are a few approaches you can take. If you have made some strong gains in any of your holdings, you could seize this opportunity to de-risk your portfolio by taking some profits off the table. On the other hand, if liquidity isn't a concern and you take a longer-term – and possibly more optimistic – view of the market, now might be a good time to think about accumulating shares in solid growth companies.

The current climate could provide good buying opportunities for tech companies like WiseTech and Altium Limited (ASX:ALU) both of which have high rates of recurring revenues to help them ride out an economic downturn. Similarly, highly-differentiated, high-margin healthcare companies like Cochlear and CSL as well as ResMed (ASX:RMD) may offer great upside potential for longer-term investors at their current deflated prices.

However, if you're more concerned about reducing volatility in your portfolio, another option might be an inverse ETF. These are portfolios of stocks that trade on the ASX like regular shares, but are specifically designed to do the exact opposite of their benchmark index.

An example is Betashares Australian Equities Bear Hedge Fund (ASX:BEAR) which aims to generate returns which are negatively correlated with the S&P/ASX 200. Since the beginning of September, the BEAR Hedge Fund has risen close to 12%. This is very close to the loss on the S&P/ASX 200 over the same time period.

This shows the downside protection an ETF can provide, especially if you hold a diversified portfolio of blue-chip stocks that tends to be closely correlated with movements in the broader market. It will also limit your potential upside, as the value of the ETF will drop as your other investments rise. However, if you anticipate periods of increased market volatility or even a possible crash, an inverse ETF can help you sleep a bit more soundly at night.

The post How the Betashares Australian Equities Bear Fund will see you profit when the ASX falls appeared first on The Motley Fool Australia.

However, there are 3 quality ETFs, which you can use to diversify your stock portfolio if you're feeling pessimistic about the outlook of the Australian stock market.

SPDR S&P/ASX Australian Government Bond Fund (ASX: GOVT)

One limitation of being a retail investor is we typically cannot invest directly into corporate or government bonds. However, there is a range of ETFs (exchange-traded funds) available to the everyday investor, which mimic the returns of bonds.

The SPDR S&P/ASX Australian Government Bond Fund (listed as SPDR GOVT/ETF on Google Finance) closely tracks the S&P/ASX Government Bond Index, which includes all securities within the Commonwealth Government Bond and State Government Bond indices. This fund charges a management fee of 0.22% and has a current yield of 3.7% p.a.

This ETF is a great option if you want to reduce the overall risk of your portfolio and provide a cushion against a potential market downturn. If the stock market does happen to fall significantly, many investors will likely shift their funds into low-risk assets like government bonds due to the safety of their principal and periodic coupon payments, which would be beneficial for the returns of this fund.

ETFS Physical Gold (ASX: GOLD)

As a retail investor it can also be difficult, or at least impractical, to invest into commodities like silver and gold, both directly and through the use of derivatives. However, the ETFS Physical Gold ETF allows investors to gain exposure to the gold market.

The ETFS Physical Gold fund provides investors with a return that is equivalent to movements in the gold spot price (less fees). The fund holds physical gold bullion within vaults in London; therefore, each share of the ETF represents a beneficial interest in this physical gold. The fund charges a management fee of 0.40% and has returned -0.06% over the last 12 months.

This fund is a great way to get exposure to gold. If you are feeling bearish about the ASX, it could be worth buying some shares in this ETF. Investors will often flock to 'safe haven' assets like gold when there is uncertainty in the economy because gold is seen as a good store of value due to its durability and scarcity. Therefore, in a bear market, ETFS Physical Gold should outperform the stock market, making it a good way to reduce the downside risk of your portfolio.

BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR)

Another limitation of being a retail investor is we are generally unable to hold short positions, or in other words, we are unable 'bet against' the sharemarket and profit from falling stock prices. However, the BetaShares Australian Equities Bear Hedge Fund ETF provides investors with a simple way to profit from (and protect against) a declining Australian sharemarket.

The BetaShares Australian Equities Bear Hedge Fund (listed as BETA BEAR/ETF on Google Finance) is an actively managed ETF, which is negatively correlated to the ASX200 index, meaning when there is a 1% fall in the Australian sharemarket, the fund can be expected to generate a positive return of roughly 1%. The fund charges management fees of 1.38% p.a. and has returned -10.5% over the last 12 months, due to positive sharemarket returns in this period.

If you are feeling pessimistic about the Australian economy and think the sharemarket is about to crash, this ETF is probably perfect for you. It is also a good way to hedge your Australian equities portfolio against falling markets and to manage your overall downside risk.

Foolish Takeaway

If you think the Australian sharemarket is overpriced and destined for a crash sometime soon, investing in these 3 ETFs is a simple and effective way for to diversify your portfolio and protect it against a contracting economy and falling equity values.

The post 3 ETFs that could help hedge against a market downturn appeared first on The Motley Fool Australia.

One metric a lot of people overlook when making their investment decisions is beta. And I can understand why. For most people, anything named after a letter of the Greek alphabet triggers flashbacks to horrible high school math classes. It just instinctively feels too complex and esoteric. But beta is actually surprisingly easy to understand. And once you grasp what it is telling you about a stock, it can be a useful addition to your investing toolkit.

So what is beta?

Put simply, beta is a measure of risk. We don't have to go into exactly how it is calculated, but essentially it tells you how volatile a stock is relative to the market as whole. The market itself will always have a beta of exactly one. So if a stock's beta is less than one it indicates that historically, on average, it has exhibited less volatility than the market. If a stock's beta is greater than one, it has exhibited more volatility.

An example might help to explain the concept. According to Yahoo Finance, Telstra Corporation Ltd (ASX:TLS) has a beta of 0.57. This tells us that, historically and on average, whenever the market has risen or fallen by, say, 10%, shares in Telstra have only risen or fallen by 5.7%. This shows you why Telstra has for so long been the darling of any income investor's portfolio. Its shares have exhibited lower volatility than the overall market and continued to pay out hefty dividends.

Compare this with another big blue chip, BHP Billiton Limited (ASX:BHP). Yahoo Finance calculates its beta as 1.26. This means that, on average, shares in BHP have exhibited 26% more volatility than the market. So historically, when the economy is going well and the ASX is reaching new highs, BHP shareholders have seen the value of their investments grow impressively.

However, when the market has crashed, BHP's shares have been punished more than most.

This is why I said beta is a measure of risk. Sure, a high beta stock might be great to hold when the economy is booming, but during a slump they can put massive downward pressure on your portfolio.

How can you use beta for stock selection?

Beta can be a useful tool when you're trying to diversify, as it will help you find stocks that reduce the overall market risk exposure of your portfolio.

Continuing the example of BHP and Telstra, if you owned both these stocks instead of just one, the overall beta for your portfolio would be somewhere in between that of BHP and Telstra. So if you're a BHP shareholder and you add more defensive stocks like Telstra to your portfolio, you will effectively reduce the overall volatility of your returns.

You can even invest in ETFs like the BetaShares Australian Equities Bear Hedge Fund (Shown in Google Finance as BETA BEAR/ETF (ASX:BEAR)), which aims to move inversely with the overall market, meaning it would actually have a negative beta. Adding investments like this to your portfolio can help to smooth your returns and make you less exposed to wild swings in the market.

Foolish takeaway:

Building a stock portfolio based on beta alone probably isn't going to deliver you particularly outstanding results.

For one thing, betas can change over time. Plus, they can be calculated in many different ways. For example, some analysts might calculate beta using returns for the whole market, or just a portion of it, like the ASX200. Analysts might use monthly returns over a five year period, or weekly returns over a 3 year period, or anything in between.

But nevertheless, a stock's beta does tell you something about the nature of an investment. It gives you an indication of how risky it is, and whether it will provide diversification benefits to your portfolio. Used in combination with other financial metrics, ratios, and company research, beta can be another helpful tool for smarter stock selection.

The post What is beta and how can understanding it help you invest smarter? appeared first on The Motley Fool Australia.

For example, Commonwealth Bank of Australia (ASX: CBA) shares are now trading on a price-to-earnings ratio of more than 15 and offering a dividend yield of less than 4.9% – not particularly attractive considering the bank is unlikely to deliver anything more than low-to-mid-single digit earnings growth over the next couple of years.

As a result, I think investors should be prepared for some volatility later this year as the market looks to take profits and wait for more attractive opportunities.

With that in mind, here are three shares that I think could help to protect investors from a sharp sell-off:

Blue Sky Alternative Investments Ltd (ASX: BLA)

As the name suggests, Blue Sky Alternative Investments is a company that invests in alternative asset classes including private equity, private real estate, real assets and hedge funds. The important thing to note here is that the returns of alternative asset classes are not closely correlated with equity markets and this can provide share market investors with an additional level of diversification and risk management. Blue Sky is forecasting a huge jump in assets under management over the next three years as investors become increasingly aware of the benefits of investing in alternative asset classes.

Future Generation Investment Company Ltd (ASX: FGX)

Future Generation is essentially a 'fund of funds' that provides investors with exposure to some of Australia's best fund managers including Paradice Investments, Regal Funds Management and Bennelong Australian Equities Partners. Importantly, the managers use a diverse range of strategies and styles that are expected to reduce the level of volatility within the portfolio. For example, some managers employ a market neutral strategy, while others may use a long only or absolute bias strategy. So far, the shares of Future Generation have been far less volatile than the broader market over the past two years, although investors can expect the shares to underperform when the market is rallying strongly.

BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ)

Most retail investors lack the ability to short sell individual shares, but investors now have the ability to take a short position against the broader market by using this exchange traded fund (ETF). This can be a very useful hedging tool if you think the market is overvalued and you want to protect the value of your portfolio without having to sell your shares. It is important to note that a 1% fall in the Australian share market on a given day can generally be expected to deliver a 2% to 2.75% increase in the value of the Strong Bear Hedge Fund and vice versa. For a little less risk, investors can also consider BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR) which will only move a comparable, but opposite amount to the market on a given day.

The post 3 shares perfect for nervous investors appeared first on The Motley Fool Australia.

Exchange Traded Funds (ETFs) are a simple concept which makes getting exposure to shares, bonds, property (e.g. REITs), commodities (e.g. gold) and currencies — easy.

Most people think of ETFs as vanilla index funds, tracking something like the S&P/ASX 200 (INDEX: ^AXJO) (ASX: XJO) line for line, stock for stock. But one of the key features of ETFs is their flexibility.

I recently covered the difference between index funds and ETFs here.

An ETF is flexible because it is simply the wrapper around an investment strategy. For example, Magellan Financial Group Ltd's (ASX: MFG) super-successful super-active and concentrated global investment strategy can now be bought through an ETF, found on Google Finance as MAGELLGEF TMF UNITS (ASX: MGE).

That's right, you can buy into Magellan's active strategy in exactly the same way as you can buy into Vanguard's index-tracking Vanguard MSCI Index International Shares ETF (ASX: VGS) strategy.

In fact, you can buy into all manner of weird and…errr…'interesting' strategies. For example, as I wrote here, you can even buy into ETFs (read 'managed funds') that are supposed to do the exact opposite of the ASX 200. Found on Google Finance as BETA BEAR ETF UNITS (ASX: BEAR), the aptly named 'Bear' fund uses futures contracts to take the opposite position of the market.

"What's a futures contract?" You ask. It's simply a contract to buy or sell shares (or almost any asset) in the future at a pre-agreed price.

But ETF strategies can get far more complicated than that. And they are not without risk.

As Evans & Partners International portfolio manager, Nicholas Cregan, CFA, recently wrote: "ETFs have not resulted in a systemic breakdown in financial markets yet, however if their relative size continues to grow in line with the 30% pa growth rate of the last decade, the ETF liquidity freezes of 2010 & 2015 may be a precursor of events to come."

You are probably wondering what happened in 2010 and 2015.

Back in May 2010 the U.S. sharemarket crashed 9% in 20 minutes — representing a loss of $1 trillion (with a 't') before recouping most of the gains. It is estimated 21,000 trade orders to buy or sell shares were pulled from the market as prices collapsed. For ETFs, which are required to track the market by buying and selling a proportion of shares in the index, that type of market puts their trading systems under pressure. An estimated 68% of the trades cancelled that day came from ETFs. No one was selling!

Alternatives to index ETFs (or any ETFs) include buying your own stocks or getting an active manager to do it for you.

"S&P noted that over the year to June 2016, 85% of U.S. active funds underperformed the S&P 500 index," Mr Cregan noted. "This in itself is not surprising, investors as a group cannot beat the market because in aggregate they are the market; net of fees and transaction costs the majority of funds will mathematically underperform."

Foolish Takeaway

If you own shares in index or active ETFs you are NOT immune from market crashes or adversely weird things happening to your investment. Always read the fine print, and understand the risks before investing because there are plenty of them.

I'm perhaps a little bias, but I think investors with an active and concentrated portfolio, meaning you buy just a few good businesses in large sums regardless of the market weighting, will do best over the long run.

And maybe, just maybe, it's time we stopped taking investing advice from Yogi Berra and saved ourselves some heartache in the future.

The post ETFs won't save you in the next recession appeared first on The Motley Fool Australia.

The BETA BEAR ETF UNITS (ASX: BEAR), as it is found on Google Finance, and the BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ) enable you to make a profit when the market falls.

Like a growing majority of ETFs, they do not passively track an index such as the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). The ETFs use a set of rules to construct a fund which you can buy into on the market, like any other ordinary share.

How does it work?

The 'BEAR' fund uses its pool of capital, which accumulates when investors buy units in the ETF (similar to buying an ordinary share in a company) to sell ASX 200 futures contracts. If that all sounds a little confusing, don't worry, I'll explain.

A futures contract is a just contract which obligates you to do something in, yep, you guessed it, the future. By selling a futures contract on the ASX 200 the ETF is obligating itself to make payments to another party if the index rises.

For example, if the BEAR ETF sold a futures contract at today's ASX 200 price of approximately 5,500 and the index went up to 5,600, they would pay the 100 points difference to the other party. That is about 1.8% (i.e. 100 / 5,500 = 1.8%) of the amount of the contract sold.

If the price went down to say 5,000 points, the BEAR ETF would receive a payment from the other party. In this example, it would be around 9% (i.e. 500 / 5,500 = 9%). Sounds simple enough. 

The 'Strong Bear' ETF does exactly what the ordinary BEAR ETF does, but it doubles the exposure. Meaning, index changes have twice the effect.

Like virtually all other ETFs these funds charge management fees.

Why do people use these things?

Investors choose to use these types of ETFs as a way to protect against losses or bet on a market crash. The ETFs provide an alternative to other devices like contracts for difference (CFDs), shorting a stock (which is usually only available to professional fund managers), options, and individual futures contracts.

BEAR and Strong Bear are just two examples of the many different types of strategies which can be found on the ASX in ETF form.

Foolish Takeaway

Trying to predict short-term movements in the market is not a sound investment strategy in my opinion. However, many people often wonder how they can 'short' a share or protect their share portfolio like the professionals do. I'm not saying this is a perfect tool for everyone, but it is one super-easy way to bet against the S&P/ASX 200.

The post One easy way to profit from an S&P/ASX 200 market crash appeared first on The Motley Fool Australia.