Bear markets, recessions, and market downturns are largely unpredictable by their very nature. Here we’ll look at the best defensive ETFs to weather the storms and survive or even thrive during periods of market turmoil.

// TIMESTAMPS:

00:00 - Intro
00:17 - Being Defensive During Bear Markets
01:33 - FUTY
02:08 - VDC
03:04 - VGIT
04:02 - SGOL
04:45 - TAIL
05:26 - USMV
06:03 - SH
06:36 - Outro

// SUMMARY:

Attempting to time the market – predicting bear markets and recessions – is usually more harmful than helpful. What we can do, however, is prepare ahead of time by assembling a diversified, defensive portfolio of different assets, geographies, and equity styles.

The key to portfolio diversification is in holding uncorrelated assets. For example, when stocks go down, bonds tend to go up. Diversification seems to be the only free lunch in the market in that sense. Diversification is particularly important for investors with a short time horizon or low risk tolerance.

Warren Buffett’s #1 rule is “Never lose money.” Mitigating drawdowns preserves capital. Black swan events and even extended bear markets and recessions are largely unpredictable, but there’s no reason to simply withdraw to cash out of fear. The defensive ETFs below help increase portfolio diversification and provide downside protection so that risk-averse investors can have peace of mind during periods of market turmoil.

Historically, there have been specific defensive asset types and sectors that are more resilient to bear markets and recessions, some of which are colloquially referred to as “crash-proof.”

- Utilities
- Consumer Staples
- Treasury bonds
- Gold
- Put options
- Low volatility stocks
- Inverse ETFs

Here we explore the best defensive ETFs to capture these assets:

FUTY - Fidelity MSCI Utilities Index ETF
VDC – Vanguard Consumer Staples ETF
VGIT – Vanguard Intermediate-Term Treasury ETF
SGOL – Aberdeen Standard Physical Gold Shares ETF
TAIL – Cambria Tail Risk ETF
USMV – iShares Edge MSCI Min Vol USA ETF
SH – ProShares Short S&P 500

Read the blog post here: https://www.optimizedportfolio.com/best-etfs-for-bear-markets/

#investing #stocks #stockmarket #bearmarket

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