NEW YORK (MainStreet) — U.S. investors may be having a long holiday weekend, but Greece's debt crisis definitely is not.
With U.S. trading closed on Friday for the July 4th holiday, investors will have to wait three days to react to any developments in Greece, most notably Sunday's referendum on whether Athens should accept or reject the latest bailout proposal.
Until the Greek debt crisis is abated, market volatility will be part of the norm. To navigate the choppy financial waters coming from the Greece, investors can protect their portfolios in several ways, including exchange-traded funds (ETFs) that bet on market declines.
Above all, investors need to remember they're in the market for the long haul.
“Volatility in and of itself is distressing, but it is not a problem,” said Matthew Tuttle, portfolio manager of the Tuttle Tactical Management U.S. Core ETF in Stamford, Conn. “The biggest thing you need to protect against is a large loss, which is often preceded by large spikes in volatility.”
A few strategies for investors to follow is to use a tactical approach: purchase ETFs or use a money manager who can “stay in harmony with market trends and can reduce exposure when the markets get volatile and gets out once it starts trending down,” Tuttle said.
Dealing with sudden volatility is tough in a pinch, but it's still possible for investors to shield their portfolios against large losses, said Patrick Morris, CEO of New York-based HAGIN Investment Management.
“Your best hope is to commit some cash to leveraged inverse ETF, because it reduces your dollar exposure and offsets big market declines,” he said. “It is fast, easy and cheap, and you get a lot of help from the leverage. This is purely tactical, so it's just for risk management. If the market runs upward it’s going to hurt.”
As Morris points out, leveraged inverse ETFs--also known as Short or Bear ETFs--have their own risks, so invest in them with caution.