Make Money When the Market Struggles with This ETF

Make Money When the Market Struggles with This ETF

An ongoing theme in the markets lately has been the sound of doom and gloom.

Be it geopolitical concerns, inflation or Fed moves, investors are seeing an increased need to run for cover. And technology stocks have been bearing the brunt of recent sell shocks.

But just because the market may not be cooperating doesn’t mean a savvy investor can’t find a way to make money. When others run for the hills, another option is to profit from market downturns with an exchange-traded fund (ETF) like Direxion Daily Technology Bear 3X Shares (TECS).

The strategy of this fund is simple enough. It provides highly leveraged inverse exposure to a broad basket of U.S. large-cap tech companies. When the S&P Technology Select Sector Index goes down, this fund goes up by approximately three times as much. Of course, the reverse is also true, so wild fluctuations in price are the norm with this ETF.

Because of its nature as a bearish ETF, this fund tends to lose value over time. Investing in it is all about timing. And the last year is no exception; it’s down 26%. However, the last three months have been a sweet spot, as TECS is up 41.26% during that time period.

Using an investment like TECS means betting against such names as Apple Inc. (AAPL), Microsoft Corp. (MSFT), NVIDIA Corp. (NVDA), Visa Inc. (V) and PayPal Holdings Inc. (PYPL). Needless to say, given their historical performance, that is a risky proposition. That’s why this investment vehicle is more of a short-term trade. It can also be used as a hedge against a market downturn, although the leverage may make it a risky way to do so.

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For investors who believe they can see a market downturn coming, Direxion Daily Technology Bear 3X Shares (TECS) could be the key to short-term gains during a difficult time for the market.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.