10 ETFs to Avoid the Next Stock Market Crash — or Profit From It

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An atrocious October in 2018 has spooked many investors in the stock market. And almost as fast, the stock market has proven yet again that it can bounce back rapidly. Just don’t look away from your money and investments for very long. The financial media keeps reminding the public that the next big sell-off, or even a crash, could be right around the corner if certain risks become reality. Here’s the other reality: You don’t have to lose your assets during a stock market sell-off or even during a crash, and you can even profit from it!

24/7 Wall St. has gathered a list of 10 exchange-traded funds (ETFs) and exchange-traded notes (ETNs) for investors who have to put their money somewhere but are afraid that the stock market could tank at any moment. These cover multiple strategies outside of regular equity index investing, and we have included instances where the ETFs have not performed properly and we have identified some risks and caveats that investors need to consider about each fund.

The next time you see a stock market crash, or just a major market pullback in a short period, be sure to look back at the performance of these specific ETF products. You’ll probably be surprised just much better they do as a whole compared to any index tracking the Dow Jones industrial average, the S&P 500 and the Nasdaq 100. And investors should consider that there are probably a few options from other ETF issuers that compete against these, almost down to the exact same strategy. Leveraged ETFs and ETFs that are too difficult to easily explain have been left out of this review.

Here are 10 ETFs for investors to seek out of they are worried about the next stock market sell-off or crash being right around the corner.

1. Short-Term Treasuries

There’s always supposed to be a yin and yang of some sort between stocks and bonds. When investors get spooked out of stocks, they often decide to park in short-term and intermediate-term bonds and the funds that track them. The Schwab Short-Term U.S. Treasury ETF (NYSE: SCHO) is probably about as safe as you get because it only invests in short-duration government debt. You’re never going to get rich investing in short-term and money-market funds, but you won’t have to worry about looking away from the ticker tape a couple of days and seeing your investment down 10%, 15% or worse. There are multiple short-term and money market instruments out there to choose from.

2. Adjustable Treasuries

Another investment in Treasury debt is in the Treasury Inflation-Protected Securities (TIPS). SPDR Bloomberg Barclays TIPS ETF (NYSE: IPE) invests in Treasury debt that has an adjustable yield rather than investing in fixed coupon debt. As Treasury yields and inflation rise, the yield on the TIPS adjusts higher with them. If interest rates go down, the yield goes down here too. You aren’t going to get rich going for adjustable-yields with the government guarantee, but you won’t ever go broke. One consideration is that some TIPS were constructed at one point in the no-rate and low-rate cycle in a manner that they could actually get negative yields temporarily.

3. Short-Intermediate Corporate Debt

If you want a little extra yield than short-term government debt, there is corporate debt issued by the top companies in America. They almost always have a higher yield than their government counterparts, and almost all the companies are investment grade in the Vanguard Short-Term Corporate Bond ETF (NYSE: VCSH). This ETF goes out a little further on the curve for added yields as it tracks the Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index. The ETF includes dollar-denominated, investment-grade, fixed and taxable debt issued by industrial, utility and financial companies. Just keep in mind that this ETF was created after the Great Recession.

4. Gold

You’ve undoubtedly seen many gold coin and gold gimmick commercials on TV over the years. Well, gold is often considered the ultimate safe-haven trade by U.S. and international investors alike. The SPDR Gold Trust (NYSE: GLD) is the granddaddy of all gold ETFs as the largest physically backed gold ETF. Gold has not been as dominant during the great bull market in stocks and as interest rates have risen, but when investors want the ultimate safety they frequently go for gold. During the Great Recession, the gold ETF and gold itself did slide lower in 2008, but it bottomed late in 2008 about four months ahead of the V-bottom in stocks, and it was off to the races long before stocks with a much stronger gain than equity ETFs through all of 2009 and 2010.