Here's How You Can Use Inverse ETFs to Protect Your Dividend Stock Portfolio

Here’s How You Can Use Inverse ETFs to Protect Your Dividend Stock Portfolio

October 14th, 2008 · No Comments

If you’re an income investor holding dividend stocks, you face a big problem in volatile markets like we have today. Even if you’re holding Dow stocks that have long histories of steadily rising dividend payments — stocks that are perfect long-term core income holdings — you run the risk of watching share prices plummet during sell-offs.

If you can handle the gut-wrenching declines that are part of the stock market game, great! A long-term perspective is important.

But what if you don’t want to just stand by and watch your portfolio lose value, even if it’s only on paper? You face a few choices …

A. You could sell immediately. But then your dividend checks will stop coming. Worse yet, you will probably end up jumping back in after the market rises — selling lower and buying higher. B. You could implement stop losses, which instruct your broker to sell your shares if they fall to a predetermined price. But again, you face the same problems above. A couple volatile days will knock you right off the income wagon.C. You could buy an inverse Dow ETF, which gives you immediate protection from a short-term market meltdown and allows you to keep your core income holdings (and the dividend streams!).C. is the best choice, especially when you use a double inverse ETF since it gives you twice the hedging power for the same money. Learn how to use Inverse ETFs today.