The current raging bull market may be more than 10 years old, but multiple scares along the way have unnerved many investors. As the fourth quarter of 2018 was a serious wake-up call that stock market sell-offs are possible, many investors have grown worried about when the stock market crash will come. Despite the markets still being up in 2019, with all-time index highs in July, there was a serious selling wave from “Sell in May and Go Away!” and then again in August based on slower global growth, falling interest rates reaching the dreaded inverted yield curve and the persistent retaliation in the U.S. and China trade war.
With all the ups and downs in the stock market and the U.S. Treasury yield curve inverting, the financial media has been using “recession” in every headline that they can work it in. After all, trade wars and poor earnings results from many of the top companies in the nation don’t add up all that well. And the thought of a recession brings back painful memories of the Great Recession and the stock market crash of 2008 and 2009.
While stock market panics and crashes are unnerving for almost every type of investor, there are many ways that even retail investors can protect themselves from big stock market sell-offs. No rule or law says you have to lose your assets during a sell-off or even during a crash. To go a step further, you might even be able to profit from the next major stock market sell-off, even if that is a market crash.
24/7 Wall St. has compiled a list of 12 exchange-traded funds (ETFs) and exchange-traded notes (ETNs) for investors who fear the next stock market crash. The reality is that most investors have to keep their money somewhere in the financial markets, and ETF and ETN products even generally can be used in most retirement accounts. These ETFs and ETNs cover multiple strategies outside of regular equity index investing, and we have included some instances of ETFs that have not performed properly, along with other risks and caveats that should be considered about each fund.
The next time you see a stock market crash, or just a major market pullback in a short period, go back and look at these ETFs and ETNs and see how they performed. Some will not have rallied much due to their structures, but some are likely to have seen major gains as that stock market panic kicked in. Investors also should consider that there are multiple other ETF issuers that may compete directly against these mentioned, and some may have the exact strategy. Leveraged and inverse ETFs have been left out of this review.
Here are 12 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. Many funds 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.
You’re never going to get rich investing in short-term and money-market funds, and watching the trading prices here might sometimes feel like watching paint dry, 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 even worse in instruments like this. There are multiple other short-term and money market instruments out there to choose from.