5 ETFs To Hedge Your Portfolio Against Volatility

The fourth quarter has been nasty for the stock market due to diverse issues including U.S.-China trade woes, political malaise in Europe, flattening U.S. yield curve and concerns over a global slowdown. However, the Fed’s dovish view, an accelerating economy, fresh cuts in oil supply by OPEC and its allies, and holiday optimism bode well for the stock market.

Powell recently said that interest rates were "just below" the level that would be neutral for the economy — meaning they will neither speed up nor slow down economic growth. Additionally, the subsequent minutes from the central bank's latest meeting suggest that the Fed will likely raise rates this month but may stall rate hikes next year.

Further, the U.S. economy has been on a solid growth track with robust job creation, strong GDP growth, a 50-year low unemployment rate, solid wage gains, and rising consumer and business confidence.

National Retail Federation (NRF) expects holiday sales — excluding automobiles, gasoline, and restaurants — to grow 4.3%-4.8% for November and December to $717.45-$720.89 billion. This is higher than the five-year average of 3.9% but lower than last year’s growth of 5.3%. Notably, Adobe expects e-commerce sales to rise 14.8% this holiday season to $124.1 billion.

In order to make the most of the encouraging trend amid volatility, investors should apply some hedge techniques to their equity portfolio. While there are a number of ways to do this, we have highlighted five volatility hedged ETFs that could prove beneficial amid market turbulence. Investors should note that these funds have the potential to stand out and might outperform the simple vanilla funds in case of rising volatility.

How to Play

DeltaShares S&P 500 Managed Risk ETF (DMRL - Free Report)

This ETF seeks to track the S&P 500 Managed Risk 2.0 Index, which is designed to simulate a downside-protected portfolio by utilizing a framework that includes targeted volatility and a synthetic option overlay to hedge the downside risk of the portfolio. DMRL has accumulated nearly $394.1 million in its asset base and trades in a paltry volume of 3,000 shares. It charges 35 bps in fees per year.  

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