Dealing With the Ups and Downs of Investing

Inverse exchange-traded funds (ETFs), which effectively bet against a particular index, may be useful in various strategies. You can use long-short strategies to dampen portfolio volatility and look for excess return from a selected investment.

Suppose, for example, you think that IBM will outperform the tech sector. In that case you might go long IBM stock and buy an inverse ETF linked to a technology stock index. That will produce profits if IBM outperforms, regardless of how the broad tech sector does.

If you go to Websites like www.etfconnect.com that list exchange-traded funds, you can recognize the inverse ETFs because they are the ones with the word "short" in their names.

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Stocks That May Be In Recovery

For the past few years, health care stocks have looked rather sickly. Large pharmaceutical companies were losing patent protection on their biggest money makers and, at the same time, were getting little return from their research and development spending.

Today, though, this industry is undergoing an innovation renaissance. All that money which was spent on R&D is on the verge of creating a whole host of profitable new drugs as well as equipment.

There are at present 334 drug compounds in the final stages of clinical trials in the U.S.; that's an increase of 24% from 2002. The big companies that haven't been developing new drugs on their own have been buying smaller ones that have. And health-care takeover spending is on a pace that may set a record in 2008.

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Stocks On Sale

Forbes magazine claims that it's ridiculous for 60-year-olds to say they won't be able to retire because of the market's downturn. History has seen many similar bear markets and yet folks have kept right on retiring.

The average bull market, of which there have been 10 since World War II, takes stocks up 150% before the cycle turns. The average 12-month rebound from the bottom is 36%. Stocks simply don't go down and stay down.

Unless you were an adult as World War II ended, stocks today are cheaper, adjusted for tax rates and interest rates, than they've been in your adult life!

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