Leveraging Your Bets

"We mainly use it to play defense," says Chad Norfolk, a principal at Financial Advantage Inc. in Columbia, Md., who allocates a small portion of clients' accounts to leveraged short or inverse ETFs as a form of portfolio insurance. The strategy essentially takes dollars off the table and offsets declines in bullish long positions . . . "It dampens volatility and provides a way to make money in a down market," he says.

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