Are indices a good idea during a bearish market?

A bear market is a period that is characterized by declining prices in assets, securities stocks. Generally such periods coincide with crises around the world, but also it may happen at any time.

During bearish markets investing in stocks could be problematic because not everyone can thoroughly analyze trends on the market. So this is the time when indices come to aid during a bearish market.

The S&P 500 index

During bearish markets, investing in indices could be a perfect idea for long term purposes. The S&P 500 is one of several leading US stock indexes. It was launched in 1957 and at first, included only 425 companies, but then financial corporations were joined there.

Currently, the Standard and Poor’s 500 includes five hundred large American corporations, and based on their activities, the index is calculated by Standard and Poors. Securities of companies included in the index are placed on such sites as NYSE and NASDAQ.

We have explained what indices are and that they could be successful during bearish markets. Also, The S&P 500 Index, along with the Dow Jones Index, measures the performance of the US economy. But unlike the Dow Jones, which includes only 30 US stocks, the S&P 500 covers a wider part of the market and is recognized as more objective. You can buy Standard and Poor’s 500 in the derivatives market as futures and is one of the most liquid instruments in the financial market. It is trading under the ticker symbol SPY.

In addition, there are other popular Standard & Poor indexes.

  • S&P 400 is an index that includes medium-sized companies (capitalization from 2 to 10 billion dollars);
  • S&P 600 is an index that includes small companies (capitalization from 300 million to 2 billion dollars). These indices are often combined in the S&P 1500. The table shows the largest companies included in Standard and Poor’s 500

How to make money on the S&P 500 index during bearish markets?

There are several strategies for working with the index:

Growth strategy

The easiest way to make money on the index is to buy securities of the SPDR S&P 500 ETF stock exchange fund. These are one of the most popular securities in America.

Futures

The most popular option for making a profit on futures is the purchase of an E-Mini S&P 500 Future. This tool is almost round-the-clock available for purchase, only guarantee coverage is paid and makes it possible to make a profit several times more than the investments made. But there are also disadvantages – due to the high wired lever, at the expiration of the futures it needs to be changed to the front one.

Fall strategy

Inverted ETFs on the S&P 500 – in this case, when buying, for example, Short S&P 500 ETF, you can shorten the S&P 500 index and make a short sale of the asset.

Futures

In this case, we are talking about short-term futures. When dealing with S&P 500 securities, only market risk should be considered. Each share of an indexed company is at particular risk.

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