Bill bannon has left a new comment on your post "It's Friday...":
Adrienne,
If the market keeps going down, you can stop or slow your aggregate IRA from doing so by buying a short etf which will go up as the market goes down. Thursday my aggregate stayed put all day by doing so but you have to play with them tentatively at first to see their effect.....and you need to have free cash in the ira or sell some stock to get the freed up cash.
MWN does three times the inverse of mid cap stocks.
So $5,000 does the work of $15,000. If a person had 20k in the market, they could get a market neutral effect (staying put) by putting 15K in stock and 5k in MWN until the down trend is over. What is happening is that your stocks are going down while MWN is going up. And you're kind of staying even.
The risk is that on a great turn up in the market, you'll also be standing still until you sell MWN.I took Bill's advice and researched "inverse etf's and, by golly, Bill is right. I know what I'm doing tomorrow.
Research "inverse etf's". You buy them just like a stock. They can counter balance mutual funds also.
Thanks, Bill...
3 comments:
"If a person had 20k in the market..." -- I have to laugh. Twenty thousand dollars is about 80% of my gross annual income!
And if the market goes up,you will lose your short position, and have to pay whatever it takes to replace it. Potentially,unlimited loss. Good luck to all of us!
If you read both my comments, I gave cautions, bunkerville
and shorting is dangerous as to unlimited loss. But inverse etf s do not have that problem. You simply sell them.
Real shorting is dangerous because it is 5 steps:
1. Borrow 200 shares from your broker
2. Immediately sell the 200 shares same hour.
3. Wait for their price to fall....maybe months.
4. Buy the 200 shares in the market t the lower price.
5. Return the 200 shares to your broker...the 200 you borrowed in the first place.
What happened is that the person made profit backwards in time. It is dangerous because of number three. You are predicting the stock will fall in price. If you are wrong, you have to buy back the 200 shares higher than step 2 and you lose.
The inverse etfs have only two steps like a stock. Buy it and sell it. As my second post said yesterday, buy them on a good day when their price is low and because you feel the market will be going down soon. I also cautioned not to keep them weeks at a time though some people do.
Adrienne
Open a retirement ira if your 401 does not allow inverse etf's. IRA's do allow them.
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