Worried About a Correction? This ETF Is a Great Way to Hedge

For those concerned about where valuations currently sit today, one might feel the need to trim and wait on the sidelines. In this article, I’m going to discuss one exchange traded fund (ETF) I think allows for investors to hold onto their existing holdings and near-term upside while hedging against downside risks on the horizon.

The VanEck Vectors Gold Miners ETF (TSX:GDX) is an ETF I’ve talked about quite a bit in the past. I think this ETF provides investors with excellent risk-adjusted return over the long-run. Additionally, I view this ETF as probably the best portfolio hedge out there right now. This is for a number of reasons, not only the fact that precious metals tend to outperform in down markets.

There are two other factors right now I think investors need to consider. Gold tends to be inversely correlated to U.S. dollar strength. I think the massive stimulus we’re seeing coming out of the U.S. can only lead to a weaker dollar as the country attempts to recover from the pandemic-led recession. Over the medium-term, this stimulus is alos likely to cause inflation.

In fact, I see inflation as an inevitable consequence of these stimulus measures, though we may not see inflation materialize for a while. Accordingly, I think precious metals prices have a lot of room to run.

If you’re bullish on gold as I am, adding exposure to a broadly diversified basket of gold miners, such as those held in this ETF is the way to go. This ETF provides excellent leverage to rising gold prices, and is one of my top picks as a way to gain long-term growth in addition to adding a portfolio hedge right now.

Invest wisely, my friends.