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5 Ways to Survive the 2014 Bond Market Meltdown

If the prospect of losing up to 50% in value is scary, here's what to do

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Hedge Your Bets

If bond values start to melt down again as I suspect they will, one way to take advantage of that trend is to own investments designed to do well when bond prices falter. Two ways to do this are with ETFs such as the ProShares Short 20+ Year Treasury ETF (TBF), and its more aggressive and leveraged big brother, the ProShares UltraShort 20+ Year Treasury ETF (TBT).



Both of these funds are designed to deliver the inverse price performance of the 20+ year Treasury bond segment, but with TBF it’s a one-for-one proposition. TBT employs leverage, and as such it’s designed to move twice the inverse of Treasury bond prices. As you can see by the price charts here of TBF and TBT, both funds surged dramatically from May through September, as smart investors rotated money into these funds as bonds were being sold off.


These hedged positions are a great way for either more conservative investors (TBF), or more aggressive traders (TBT) to take advantage of periods where bonds are out of favor—and these funds will really give your portfolio an edge during the next bond market meltdown.

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