The Four Horsemen Of The Stock Market Apocalypse [SPDR Gold Trust (ETF), SPDR S&P 500 ETF Trust, Vanguard REIT ETF, Sprott Physical Gold Trust, Central GoldTrust] - Seeking Alpha

The Four Horsemen Of The Stock Market Apocalypse [SPDR Gold Trust (ETF), SPDR S&P 500 ETF Trust, Vanguard REIT ETF, Sprott Physical Gold Trust, Central GoldTrust] - Seeking Alpha



Eric Parnell has written another great article about how to prepare for a bear market which may be coming soon due to problems in Ukraine and a weak Chinese economy.  He made the point that diversification in stocks in useless in a bear market scenario since most stocks fall together.  Therefore, a person must look elsewhere to protect his or her money in a financial crisis.



TLT, the long-term U.S. treasury bond ETF, is one good investment during bad times.  Eric stated that during the past financial crisis from 2007 to 2009 that TLT gained 55% while the S&P 500 fell almost 60%.  During the short-term budget ceiling crisis in 2011, TLT gained 30% while the S&P fell almost 20%.  Cash can also be held during a bear market to protect your money or you could own BIL, the short term treasury bonds ETF.



Another point to make is that volatility as measured by VIX is very high during a bear market.  Eric stated that VIX gained more than 400% during the 2008 financial crisis.  Since VIX is just an index, you would need to buy an ETF like VXX or TVIX to make money on volatility.  TVIX made it to over $100 per share during the last bear market, but it has since had a number of reverse splits.  That is the danger of holding volatility ETFs because they have a tendency to decay rapidly.  You must take your profits when you have them whenever you own VXX or TVIX.  I currently own TVIX at a profit since I bought it in the low $7 range, but I plan to take my profit somewhere above $10 per share or whenever I think the current world problems have peaked.