Volatility has played a major role, or rather detriment, to investment portfolios over the years. However, investors can take better control over their market exposure with alternative indexing and exchange traded funds.
At the ETF Virtual Summit on January 15, the featured panel on”Today’s Popular Alternative ETF Weighting Strategies,” which includes industry experts from ProShares, DirexionFunds and STOXX Ltd, will focus on ways investors can diversify with alternative investment strategies.
Most investors are long equities and fixed-income assets. With alternative or non-traditional assets, people can gain exposure to non-correlating investments that help offset dips in stock and bond positions.
Correlation is a measure of how two securities move in relation to one another. Investments that are perfectly correlated tend to move in tandem, whether in a down or up market. Investors can typically utilize alternative asset classes and strategies to lower portfolio volatility and provide a hedge against traditional market risks.
For instance, the ProShares RAFI Long/Short ETF (RALS) , which is based on strategies developed by the “father of fundamental indexing,” Rob Arnott, and the ProShares Hedge Replication ETF (HDG) both utilize long and short positions to diminish market risk.
Investors can also diminish risk exposure in specific markets and sectors through inverse and leveraged ETFs. For example, given the recent rise in yields on benchmark 10-year Treasuries, investors can use Direxion Daily 7-10 Year Treasury Bear 1x Shares (TYNS) or Direxion Daily 20+ Year Treasury Bear 1x Shares (TYBS) to hedge against falling Treasury prices. [Inverse Treasury ETFs Help Hedge Against Rising Rates]
Financial advisors interested in attending the annual virtual summit on January 15 can register at ETF Virtual Summit registration.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.