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Commodities scare puts ETF investors in defence mode


With the commodities market becoming more volatile, investors might find refuge in flocking to equities with handsome-paying dividends. But financial advisor, Randy Warren (pictured), says that’s not good enough — investors need to go one step further in order to hedge their bets in this market.  

"Products like ETF’s have given investors a chance to bank on all kinds of commodities and this year those investors need to kick into protection mode," says Warren, chief investment officer of Warren Financial Service.

Warren Financial Service (WFS) recently designed an investment strategy for its own advisory clients that hold ETF products. The WFS Big Dividend Strategy is a hedged combination of investments in dividend-paying equities and options on the VIX, a key measure of stock market volatility, providing risk protection by: reducing the volatility associated with owning stocks; Investing in well-researched stocks that produce dividends in the 8% range; providing a hedge that is reverse correlated to volatility in the commodities market; providing a hedge with options that spike from 300% to 800% on downturns in the market when the S&P 500 falls -3% or more; and producing gains with low capital requirements and a moderate level of risk.

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