September 15, 2009 (FinancialWire) — Dr. Joe Duarte (http://www.joe-duarte.com) recently noted: The Short S&P 500 Shares ETF (NYSE: SH) may have a place in a well diversified portfolio over the short term.

Duarte added: Volatile markets make investors jittery, and rightly so. Yet, especially in portfolios that are taxable, such as non-IRA accounts, active trading can lead to a fair amount of taxable, if not accountable activity.

That means that, especially, during wild political times, investors may need a tool to protect their portfolio without selling everything and going to cash.

That’s what the Short S&P 500 Shares ETF and other ETFs that specialize in short selling can provide, a hedge without the volatility and extra work that buying options or going to cash can bring on.

Right now, SH is fairly cheap, as it broke to a new low last week, as the S&P 500 made a new high. SH moves in the exact opposite direction of the S&P 500. So by buying shares of SH, investors are shorting the market. If the S&P 500 goes up, SH shares will go down.

New investors, and those who don’t understand or fear short selling should not buy shares in SH. And although SH is not leveraged, as its moves in a one to one fashion with S&P 500, because it shorts the S&P 500, is more volatile than an ETF that buys shares that rise in price.

Duarte’s conclusion: The bottom line is that for those who are not sure about liquidating their portfolio, owning shares in SH can protect the value of the portfolio as other shares fall in price. The flip side is that if it’s worth 10-15% of the portfolio, it won’t hurt the long side of the portfolio if the market keeps going up. Also, using a 5% sell stop below the purchase price of SH would limit any losses.

You can read about trading ETFs in more details in Market Timing For Dummies.

Make sense of today’s nonsense. Get Doctor Joe Duarte’s Market I.Q., at: http://www.joe-duarte.com/free/order_choices.asp and subscribe to www.joe-duarte.com, for its daily energy review and stock picks.

A book for this market - The All NEW Market Timing For Dummies. at: http://www.tinyurl.com/market-timing .

Duarte partners with the Investors Resource Center at Investrend Information (http://www.investrendinformation.com).

Duarte’s IntelligentForecasts.com (http://www.intelligentforecasts.com) provides free news coverage and analysis, and his daily articles and news summaries offer recommendations and analysis for ETFs, and individual stocks in the technology, health and biotechnology, and energy sectors. Duarte has combined expertise in health care, energy, and the effects of politics and global intelligence on the financial markets offer a unique blend of insight and information to thousands of active investors and political and intelligence aficionados around the world on a daily basis.

He is the author of: Futures And Options For Dummies, Successful Energy Sector Investing, Successful Biotech Investing and co-author of After-Hours Trading Made Easy. In early 2001, in Successful Energy Sector Investing, he correctly predicted that Venezuela’s political problems could lead to an energy crisis in the United States. He has also appeared as a weekly guest on Market Mavens Radio and has logged appearances on KNX radio in Los Angeles, Financial Sense.com radio, and Wall Street Radio.

One of CNBC’s original Market Mavens, Dr. Duarte has been writing about the financial markets since 1990. His articles and commentary have been featured on CBS Marketwatch, Barron’s, Smart Money, Medical Economics, and in Technical Analysis of Stocks and Commodities magazines. In 2003, Doctor Duarte received second place, in the professional section, of the Medical Economics Investment Challenge with a 12-month return of 42%.

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