With each passing day there grows more and more speculation that global markets are headed for another downturn. One of the favorite theories of investors and analysts is that all of the bailouts and quantitative easing programs have acted as a cover up for the deep-seeded issues in our economy; once the Federal funding stops, those issues will return to the foreground. As such, a number of individuals are trying to decide how to best play the commodity market for the next financial meltdown. Below, we outline five ETFs to help you profit from the financial world’s demise [for more vital commodity updates subscribe to our free newsletter].
SPDR Gold Trust (GLD)
This was a fairly obvious choice, as many analysts and individuals suspect that gold will be the real winner from these inflated debt levels. This ETF invests in physical bullion and is one of the largest funds in the world, weighing in with over $60 billion in AUM. It should be noted that many investors and bloggers are skeptical as to whether or not this fund actually holds gold, or is a “paper” asset. We further explored that issue here. If you are wary of ETF investing or just not a fan of GLD, you can always purchase physical bullion to satisfy your exposure needs.
iShares Silver Trust (SLV)
The other precious metal, silver, is another popular choice for a market fallout as it also tends to be a safe haven investment. This ETF features a physical exposure to spot prices of silver and trades hands over 10.7 million times each day. It should be noted that silver has heavier ties to the industrial sector than gold, so its price could take a hit based on weakness in that market segment (typically one of the first to go in a recession). Silver is not as sure-fire of a bet as gold, but it is traded less heavily, so its prices are not subject to the market manipulation that gold endures [see also 25 Ways To Invest In Silver].
3x Inverse Natural Gas ETN (DGAZ)
First things first, this fund is meant only for trading. Holding DGAZ for an extended period of time could leave you on the receiving end of a very sour trade. That being said, when recessions roll around, natural gas typically takes a hit (as it did back in 2008). This fund applies an inverse 3X leverage on NG futures, allowing it to produce massive gains in a weak environment for this fossil fuel. Again, DGAZ is a very dangerous tool that should only be utilized by active traders who fully understand the risks that go along with investing. That being said, this fund may offer you overwhelming potential to produce strong capital gains.
2x Gold Bull/S&P 500 Bear (FSG)
Another trading tool, FSG offers a unique spin on gold prices. Half of the portfolio’s assets go long in gold, while the remainder short the S&P 500, all with a 200% leverage. In essence, this fund tracks the spread between gold and this massive benchmark. When markets begin to take a nosedive, and if gold is able to hold its ground, this fund will be an even more lucrative option than investing in the precious metal itself. Remember, it is intended for traders who fully understand its dangers, so the average investor should steer clear [see also Why Buffett is Dead Wrong on Gold].
S&P 500 VIX Short-Term Futures ETN (VXX)
No, volatility is not technically a commodity, but its futures prices are often lumped in the same category with a number of other popular hard assets, so we thought we would include it. VXX is quite literally built to prey on weak markets; if there was ever a crash, this would be one of the best ETNs to own, hands down. Tracking front-month VIX futures, VXX is yet another trading instrument that can make or break you depending on your knowledge going into the position. To give you an idea of this fund’s potential, the VIX is currently sitting below 20. Back in 2008, that index surged to nearly 70, leaving room for a stellar investment decision.
Disclosure: No positions at time of writing.