How To Profit When Investors "Sell In May And Go Away"

But when markets go down, it naturally gets a little trickier; you can look for stocks that do well in tougher markets – some of the bigger retail names like Target Corp. (NYSE: TGT), Walmart Inc. (NYSE: WMT), or Home Depot Inc. (NYSE: HD) should still do well in a correction, or, at the very worst, drop to more attractive levels.

You can grab shares of an inverse or leveraged inverse ETF that'll return more the lower the market drops, like the ProShares Short S&P 500 ETF (NYSEArca: SH). If you go the leveraged route, like with the ProShares UltraShort S&P 500 ETF (NYSEArca: SDS), you can bank multiple times the markets' drop. Be careful, though, because if the market bounces back – as I think it probably will ultimately – these shares can drop like a hot rock. These are definitely short-term, speculative bets – don't put all your chips there.

A lot of people like to run out and buy puts on the SPY ETF, so they can make money when the index drops. That can be great if you time it correctly, but it can be difficult to consistently rake in the big profits I like doing that.

My favorite strategy is one that can work pretty much every time, no matter what the market's doing: Follow the money. There's always money moving somewhere, and the smart money tends to move first and in the greatest amounts.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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