Recently, I addressed your question, “When equities go down, do bonds go up?” I compared top bond funds performance vs. the market (S&P 500) during previous sell-offs. Most of these funds did go up when the market sold off, but nowhere near the percentage that the market dropped. In addition, while holding (in case the market goes down) bond fund investors missed out on the tremendous Bull Run since 2009, but hindsight is 20/20.
Today, I begin my next series per your question, “Are there other securities that go up when the market goes down?” In order to provide a sufficient answer, I use three inverse market ETFs and one Bear Mutual Fund: 1. ProShares Short DOW 30 ETF (DOG); 2. ProShares Short S&P 500 ETF (SH): 3. ProShares Short ETF (PSQ), 4. Rydex Inverse S&P 500 Strategy Inv. Mutual Fund (RYURX). All are inverse funds and designed to go up when the index they track go down.
I designed today’s chart to see if these inverse (Bear) funds went down when equities (stocks) rallied during the recent year Bull Run. Unfortunately, due to space limitations I can only use one index (S&P 500) as a comparison. In an apple- to- apple comparison, each fund should be compared to the index it tracks. Currently, there is less than a 1.3% return spread between all three major indexes. While the one mutual fund (RYURX) requires a hefty minimum initial investment, all of the other funds can be purchased through many online brokerages and also can be purchased with only one share as a minimum investment.
You can see the performance of these inverse funds vs. the market (S&P 500) the past year. During this time frame, the S&P 500 ran over 13 percent. All four inverse funds performed as designed and were down while (SPX) was up. Keep in mind that past performance does not dictate future returns.
This data helps answer your question: “Are there other securities that go up when the market goes down?” Next week, we will analyze the results during the 2007-2009 down turn.
Plan your work, work your plan, and share your harvest!
David England
davidoengland.com
