10 ETFs to Avoid a Stock Market Crash in 2019, or Even Profit From It!

Investing

Published: December 28, 2018 7:30 am

Last Updated: January 11, 2020 1:12 pm

December of 2018 has been an exhausting month for stock market investors. Most investors had been used to seeing the famed “Santa Claus rally” at the end of each year, but this bloody trading action felt more like 2008 than any of the more recent years as the market rose. To make matters worse, headlines were all over the place heading into the last week of 2018 that this was the worst stock market performance for the month of December dating all the way back to the early 1930s under the Great Depression.

While most stock market investors lose money during big stock market sell-offs, they do not have to suffer just because of a big drop in the Dow Jones industrials and S&P 500 indexes or the Nasdaq. In fact, even the smallest of investors can actually profit during these big sell-offs or corrections, and even during market crashes.

24/7 Wall St. has compiled a list of 10 exchange-traded funds (ETFs) and exchange-traded notes (ETNs) for investors who want to keep their money invested during periods of uncertainty. These ETFs and ETNs generally are considered to be among the go-to investment and trading vehicles if it looks like the stock market could drop sharply at any moment. These cover multiple investing strategies outside of regular equity index investing. In an effort to keep this fair and representative, we have included instances in which some of these ETFs have not performed properly during certain times, and we also have identified some risks and caveats that investors need to consider about each fund.

As 2019 kicks off and the pain and volatility of 2018 fades, there were and still are many worries for the economy in 2019. There is of course that looming trade war and tariff battle with China. Fears remain that the Federal Reserve will continue to raise interest rates to the point that the economy will be choked into a major slowdown, and there are fears of what will happen under an inverted yield curve. Growth numbers are slowing in many of the early-cycle economic readings and forecasts, and many corporations already have dialed down their 2019 expectations. There are also those pesky geopolitical risks and a battered international equity market scene that come into play. And many investors are worried about 2019 not being as good as the political gridlock of past years.

The bull market was fun for the last nine-and-a-half years, but waves of volatility and pain in the stock market in 2018 led even some of the more famous and notorious institutional investors and forecasters to start predicting that the bull market was dead or dying. Again, investors do not have to watch the value of their stocks plummet if they look into some simple ETFs designed to help investors hedge their portfolios or even to profit when the next major selling wave hits home.

Investors have been reminded recently that automated trading systems and algorithmic trading can hijack a market with exacerbated moves up and down on any given day. These 10 ETFs can help even the smallest of retail investors avoid losing their shirts, or even make a profit, during uncertainty in the next major sell-off or stock market crash. Investors should look at the performance of these specific ETF and ETN products ahead of, during and after a serious market sell-off. It is surprising just much better they can do as a whole compared to any of the indexes and funds tracking the Dow, S&P 500 and the Nasdaq.

Investors also should consider that there are other funds from ETF issuers that compete against these, often down to the exact same strategy. Leveraged ETFs and others that have strategies too difficult to easily grasp have been left out of this review, as have some of the ETFs that may fit the bill in their models but have low average daily trading volumes.

Here are 10 ETFs for investors who want to avoid, or even profit from, the next big stock market sell-off or even a stock market crash.

1. Short-Term Treasury ETF

There’s supposed to be a tug-of-war of some sort between stocks and bonds during periods of volatility and uncertainty. When investors get spooked out of stocks, they often decide to park in short-term and intermediate-term bonds. There are many funds that track short-term Treasuries. 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.