Since the stock market crashes every once in a while, and daily collapses of 100 points or more in the Dow are becoming commonplace, such as Friday’s 279-point nosedive, it seems like a good idea to sell the market short to some extent as insurance.
Bearish ETFs therefore serve as insurance policies for those with lots of money in the market, just like flood-insurance policies serve those with expensive homes located on coastlines.
Some of the lowest-priced bearish ETFs are TZA, TECS, and FAZ. When the financial hurricanes that are predicted to happen virtually every week by respected economists finally come, it’s good to know that with a few bearish ETFs your portfolio won’t end up a complete disaster area.
While that very well may end up being the case, I'd have thought that the best strategy depends on a combo of time frame and risk tollerance. For my planning last Friday's 1 to 1-1/2 % drop is still within the range we've been seeing over the past half year, and personally I'm just looking to see how tomorrow goes before I agree to join in with the selloff.