Investing Guide to Bear Market Profits
A basic investing guide might focus on how to invest in the stock market.
This brief investing guide is about investing money to profit when the stock market is falling...
in a bear market.
Now, even a new investor can do it.
Twice between the start of year 2000 and 2009, a bear market clawed investors severely.
Losses were in the trillions.
Both times some contrarian investors knew how to invest and got rich.
They were SHORT the stock market - had a short position.
Simply put, they bet that the stock market would fall.
If you are a new investor this probably sounds absurd or illegal to you.
Not so.
Shorting or "selling short" or "short selling" has been part of the free market mechanism for a long time.
The late Joe Kennedy, father of John F.
Kennedy, knew all about it...
and was an active participant in the markets in the era of the Great Depression.
And it appears that he made money.
Traditionally you took a short position in the stock market by first selling a stock that your broker borrowed for you.
Then you waited for the stock to fall in price so you could later buy it cheaper and return the borrowed shares.
The difference represents your profit.
Or, you bought PUT stock options, which are a bet that a stock(s) will fall in price.
In this investing guide we will keep it simple and not get into the nuts and bolts of the two above methods of taking a short position in the stock market.
Instead we will show you how to invest against the market the new and easy way by simply buying a stock called an inverse or BEAR MARKET exchange traded fund (ETF).
These stocks trade on major exchanges like any other stock commonly traded.
A bear market ETF maintains a portfolio of securities with a short position, betting that prices will fall.
When you own shares of an exchange traded fund you own a small part of the portfolio.
Hence, by owning shares in a bear market ETF that shorts the stock market...
you have a short position.
You can buy or sell shares in a matter of seconds anytime the stock market is open.
Here's an example of how to invest as a stock market BEAR (one who bets that prices will fall).
As a new investor you buy 100 shares in SDS, a bear market fund that shorts the S&P 500 Index with 2 to 1 leverage.
Let's say you pay $40 a share for a total investment of $4000.
You could buy 10 shares or thousands and still only pay $10 commission with a discount broker.
A month later the stock market as measured by the S&P 500 Index (which represents the market) is down 10%.
Your SDS stock with 2 to 1 leverage should be up about 20% or $8 to about $48.
You can buy more, hold, or sell for a profit of about 20%.
The process is that simple.
What's not simple is timing your purchase, because obviously if the stock market goes up after you buy SDS, the stock will go down.
The new investor should also be aware of the risks involved with financial leverage (like 2 to 1) and betting against the stock market.
It is up more often than it is down.
Except, that is, in a bear market.
There are numerous bear market ETFs.
Get familiar with them and how they trade.
You can get your feet wet for a few hundred dollars.
One final tip from this investing guide for bears: don't buy these stocks as a long term buy and hold.
If you take a short position and it goes against you, get out at a small loss and live to play another day.
A bull market like the one that started in March of 2009 can be brutal if you're a bear.
This brief investing guide is about investing money to profit when the stock market is falling...
in a bear market.
Now, even a new investor can do it.
Twice between the start of year 2000 and 2009, a bear market clawed investors severely.
Losses were in the trillions.
Both times some contrarian investors knew how to invest and got rich.
They were SHORT the stock market - had a short position.
Simply put, they bet that the stock market would fall.
If you are a new investor this probably sounds absurd or illegal to you.
Not so.
Shorting or "selling short" or "short selling" has been part of the free market mechanism for a long time.
The late Joe Kennedy, father of John F.
Kennedy, knew all about it...
and was an active participant in the markets in the era of the Great Depression.
And it appears that he made money.
Traditionally you took a short position in the stock market by first selling a stock that your broker borrowed for you.
Then you waited for the stock to fall in price so you could later buy it cheaper and return the borrowed shares.
The difference represents your profit.
Or, you bought PUT stock options, which are a bet that a stock(s) will fall in price.
In this investing guide we will keep it simple and not get into the nuts and bolts of the two above methods of taking a short position in the stock market.
Instead we will show you how to invest against the market the new and easy way by simply buying a stock called an inverse or BEAR MARKET exchange traded fund (ETF).
These stocks trade on major exchanges like any other stock commonly traded.
A bear market ETF maintains a portfolio of securities with a short position, betting that prices will fall.
When you own shares of an exchange traded fund you own a small part of the portfolio.
Hence, by owning shares in a bear market ETF that shorts the stock market...
you have a short position.
You can buy or sell shares in a matter of seconds anytime the stock market is open.
Here's an example of how to invest as a stock market BEAR (one who bets that prices will fall).
As a new investor you buy 100 shares in SDS, a bear market fund that shorts the S&P 500 Index with 2 to 1 leverage.
Let's say you pay $40 a share for a total investment of $4000.
You could buy 10 shares or thousands and still only pay $10 commission with a discount broker.
A month later the stock market as measured by the S&P 500 Index (which represents the market) is down 10%.
Your SDS stock with 2 to 1 leverage should be up about 20% or $8 to about $48.
You can buy more, hold, or sell for a profit of about 20%.
The process is that simple.
What's not simple is timing your purchase, because obviously if the stock market goes up after you buy SDS, the stock will go down.
The new investor should also be aware of the risks involved with financial leverage (like 2 to 1) and betting against the stock market.
It is up more often than it is down.
Except, that is, in a bear market.
There are numerous bear market ETFs.
Get familiar with them and how they trade.
You can get your feet wet for a few hundred dollars.
One final tip from this investing guide for bears: don't buy these stocks as a long term buy and hold.
If you take a short position and it goes against you, get out at a small loss and live to play another day.
A bull market like the one that started in March of 2009 can be brutal if you're a bear.
Source...