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Stocks To Buy Now That Will Make You Money In The Upcoming Stock Market Crash

Updated: Aug 17, 2022

To be completely honest, if you are a long-term investor who is buying and holding stocks in a bear market then you will lose money in the short-term.

As inflation and recession fears escalate and the stock market sentiment reaches a point of maximum fear, stock prices and valuations will decrease to levels that we could not even fathom during the bull markets of 2020 and 2021.

For those with a long time horizon, the bottom of the stock market will be the point of maximum financial opportunity, and these investors should obviously be accumulating shares of their highest conviction stocks for the eventual rebound.

In the meantime, in case the stock market has much further to fall, consider the below investments to protect yourself and make money on the way down:

  • ProShares UltraPro Short QQQ ETF (SQQQ)

  • Tuttle Capital Short Innovation ETF (SARK)

  • Dollar Tree (DLTR)

  • SPDR Gold Share ETF (GLD)

  • VanEck Vectors Gold Miners ETF (GDX)

  • iShares Silver Trust (SLV)

  • Global X Silver Miners ETF (SIL)

  • iShares 20+ Year Treasury Bond ETF (TLT)

ProShares UltraPro Short QQQ ETF (SQQQ)

For those with shorter time horizons who want to actually make money in this stock market crash, or those who have trouble stomaching the volatility and need to hedge against their portfolios, then consider the ProShares UltraPro Short QQQ ETF (SQQQ) or Tuttle Capital Short Innovation ETF (SARK).

Both of these ETFs are nice alternatives for people who do not know how to trade stock market options to profit as the market continues its downtrend.

SQQQ is a 3X inverse leveraged ETF, meaning it attempts to produce three times the opposite return per day of the Nasdaq 100 index. The Nasdaq 100 index contains the 100 largest companies by market cap on the Nasdaq stock exchange excluding financial institutions and is highly tech oriented. This means that if the Nasdaq falls by three percent in one day, then the SQQQ ETF should increase by roughly 9 percent that same day.

Sounds great, so why not hold long-term?

  • Time decay can erode price returns over the long-term: SQQQ accomplishes this by using derivatives contracts and margin short positions. This is beyond the scope of this article, but just know that the underlying financial instruments of the ETF can possibly produce what is called "time decay," which can erode price returns over the long-term.

  • High ETF expense fees: Another reason why you do not want to hold SQQQ for the long-term is due to the high ETF expense fees of 0.95%, which are handled in-house by the fund company and deducted from the net asset value of the fund daily. These fees can really add up over time for those with a substantial position.

  • The stock market will eventually recover: The obvious reason why one would not want to hold this fund for the long-term is the fact that since its inception, the stock market has always recovered from any recession, geopolitical crisis, or financial crisis and eventually reached new, all-time highs. Holding SQQQ is basically a bet against the United States or global economy and will produce enormous negative returns over months or years.

Instead, SQQQ is much better suited for a short-term trading strategy. If you have conviction that the stock market will go negative over the course of several days or weeks, then buying a few shares of this ETF will allow you to profit during the market downtrend and hedge against your other long-term, declining stock positions.

Other alternatives to look at are the ProShares PSQ ETF, which delivers the opposite return of the NASDAQ on a one-to-one basis, and the ProShares QID ETF, which provides a 2X opposite return of the NASDAQ. These ETFs have less upside potential returns but would lower your downside risk if you mistime the stock market’s direction.

SQQQ vs QQQ returns since 10/2021

(SQQQ is green line)

Tuttle Capital Short Innovation ETF (SARK)

Another similar ETF to SQQQ is the Tuttle Capital Short Innovation ETF (SARK), which strives to deliver the inverse return of the ARK Innovation ETF (ARKK) for a single day on a one-to-one basis.

The ARK Innovation ETF is the infamous and disruptive innovation ETF founded and led by fund manager, Cathie Wood. ARK focuses on hyper growth companies in early stage industries such as artificial intelligence, blockchain technologies, fintech, autonomous vehicles, genomics, and the next generation internet.

The ARK Innovation ETF hit a low of around $37/share at the bottom of the March 2020 coronavirus pandemic stock market crash, but appreciated to $156/share by February 2021, producing over a 300% return. This made Cathie Wood one of the most admired fund managers at that time.

During the worst of the pandemic, the government’s excessive trillion dollar stimulus packages and near zero percent interest rates catapulted the stock market to absurd valuations as seen in stocks like Shopify, Zoom, Teladoc, and Roku.

The tech stock bubble burst in February 2021 as the government’s stimulus packages and low interest rates led to record high inflation rates that we have not seen in over 40 years.

At the time of this writing, the ARK ETF price is $45/share, down over 70% from all-time highs. To this day, the Federal Reserve is raising interest rates and reducing its balance sheet to combat this record inflation, which will be an ongoing headwind or detriment to the high-growth, speculative stocks in the ARK Innovation ETF.

This is because high levels of inflation reduce economic activity, and high interest rates lead to higher costs to borrow for these disruptive, early stage companies that depend on constantly investing capital back into the business to grow revenue and margins at the expense of profitability.

In theory, until investors believe that the Federal Reserve can control inflation back down to historic levels, and then stop raising interest rates and its economic tightening, high growth tech companies will continue to suffer.

If you believe that these recessionary headwinds will persist, then it might be wise to buy shares of SARK to profit as the famous ARK ETF continues to collapse.

The same warnings in regard to time decay and high fees with SQQQ apply to SARK. This should also be a short-term trading strategy as the market operates in cycles. It is possible that years into the future many of Cathie Wood’s bull theses for disruptive innovation may come to fruition as the companies in her ETF go on to reach new highs.

SARK vs ARKK returns in 2022

(SARK is green line)

Dollar Tree (DLTR)

The reason why Dollar Tree (DTLR) is a safe stock to buy during times of high inflation, or when there is risk of a recession seems straightforward. As people face a recession and possibly a weakening labor market, they think harder about prices and saving. This leads to more shopping and revenue at discount retail stores selling essential items compared to the consumer discretionary segment of the economy.

In fact, Dollar Tree has outperformed the S&P 500 index (SPY) so far this year in 2022. Also, if we look at how Dollar Tree performed during the last recession and financial crisis of 2008, we see that Dollar Tree vastly outperformed the S&P 500 index and actually made investors money from 2008-2011 (see chart below).

It’s reasonable to assume that if we are headed into a deep recession, or if inflation persists, that Dollar Tree will be a relatively safe stock to preserve your capital, and possibly grow your money as the general stock market plummets. Other similar and relatively safe stocks to consider are Walmart (WMT), Ross Stores (ROST), and Dollar General (DG).

DLTR vs SPY returns from 2007 to 2011

(DLTR is green line)

SPDR Gold Share ETF (GLD)

It is no secret that gold equities and physical gold in the form of bars or coins are the ultimate inflation hedges you can own.

Gold is the only form of money or store of value that has stood the test of time through countless recessions, financial crises, or failed fiat currencies over thousands of years.

Because there is a finite amount of precious metals on earth, gold will always hold intrinsic value that cannot be diminished over time due to its relative scarcity.

It’s no wonder why in times of economic uncertainty and peak fear in the stock market that investors flock towards gold to protect their wealth as gold is seen as a safe haven asset.

In fact, during the decade of the late 1990s to 2010 where the stock market experienced both the disastrous bubble and 2008 financial crisis, if you had invested $100 in the S&P 500 in 2000 and held until 2010, you would have only gained 9.78% on your investment, or -13.31% if adjusted for inflation.

If you had invested in gold in the year 2000 and held it until 2010, you would have gained a 294.611% return on your investment, or 209.402% if adjusted for inflation.

If the economy worsens and a prolonged, deep recession happens, you can expect gold to outperform the next few years as investors flee to safety.

The SPDR Gold Share ETF (GLD) is the largest physically backed gold exchange traded fund in the world, and is a great way to get exposure to the price movements of gold without the hassle of buying the asset physically.

2007-2011 GLD vs SPY Returns

(GLD is green line)

VanEck Vectors Gold Miners ETF (GDX)

If you want a leveraged exposure to gold, you should consider the VanEck Vectors Gold Miners ETF (GDX). GDX is an ETF consisting of large market cap gold mining companies, or companies involved in getting gold out of the ground and into the hands of buyers.

In times of economic trouble and when the precious metal industry is bullish, the gold miners are able to typically use their operating leverage to increase profits, which leads to a boost in share prices that are often multiple times higher than the underlying market price of gold.

See for yourself in the chart below just how much GDX outperformed GLD during the recent coronavirus pandemic.

2020-2022 GDX vs GLD COVID-19 Pandemic Returns

(GDX is green line)

iShares Silver Trust (SLV) and Global X Silver Miners ETF (SIL)

Another asset to consider in the same vein is silver. Silver has many of the same precious metal and store of value fundamentals as gold historically, but half of the demand for silver is industrial as it is a key component for electronics and green energy industries.

This means that silver can perform well in stock market downturns and also when the economy is booming. Silver stocks to consider are the iShares Silver Trust (SLV) and the Global X Silver Miners ETF (SIL).

iShares 20+ Year Treasury Bond ETF (TLT)

Probably the most risk-free investment to store your cash in are U.S. Treasury Bonds (T-bonds), backed by the full faith and credit of the United States government.

The US government has never defaulted or missed payment on a debt, and there is a zero chance of losing your principal investment in treasury bonds.

Owners of U.S. treasury bonds know exactly the interest they will be paid on maturity, and you would have to imagine the sheer collapse of the United States government for a default on treasury bonds. There is no risk of this in the foreseeable future.

The safest investments produce the lowest returns, and this is true for treasury bonds as well.

Although demand for U.S. bonds may increase during a stock market crash and bond yields may increase somewhat, historically, you cannot expect significant returns from treasury bonds.

The risk of investing in treasury bonds is the opportunity cost that you may have received a better return on other investments such as the earlier entries in this list. In fact, if the rate of inflation continues to spike upwards, there’s a chance of inflation adjusted negative returns if the inflation rate exceeds the government bond fixed interest rate.

Overall, T-bonds are more suited for those trying to protect their capital rather than making money in a bear stock market.

If you invest in treasury bonds with the mindset of preserving your money at a much higher interest rate than you would receive in a traditional bank checking account, then you will be happy as the stock and cryptocurrency markets keep dipping.

If treasury bonds sound right for you, then consider the iShares 20+ Year Treasury Bond ETF (TLT) which tracks long-term United States treasury bonds.

2008-2011 TLT vs SPY Returns

(TLT is green line)

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