Markets have become incredibly volatile lately.

This is all thanks to fears around inflation, the Federal Reserve, higher energy prices, and the debt ceiling, not to mention the concerns the global economy is slowing. Even the International Monetary Fund (IMF) is concerned, cutting its global economic forecast thanks to the coronavirus pandemic.

In fact, while the IMF predicted 6% global economic growth earlier this year, that will be scaled back, according to Kristalina Georgieva, the IMF’s managing director, as noted by The Guardian: “After a summer hit by supply-chain bottlenecks and rising inflationary pressures, the IMF chief said momentum in the US and China—the world’s two biggest economies—was slowing.”

Together, it’s all a recipe for disaster, fear, and wild uncertainty.

How to Invest in Volatile Markets

Fortunately, we can invest in volatility with an exchange-traded fund, or ETF.

However, before we jump into some of the volatility-focused ETF opportunities, we should first define what volatility and an ETF are.

ETFs are “a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same way a regular stock can. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities,” as noted by Investopedia.

When it comes to volatility, we’re referring to periods of unpredictability, and sometimes sharp price movements up and down. Investors can track the severity of volatility and fear in the market by tracking the Cboe Volatility Index, also known as the VIX. Higher moves in the VIX tell us volatility is higher. Lower moves in the VIX are a sign of complacency.

For your consideration…

Two top ETFs to consider when markets get a bit nuts include:

• ProShares VIX Short-Term Futures ETF (VIXY), which tracks the S&P 500 VIX Short-Term Futures Index. It’s for investors that are looking to profit from the potential for higher volatility on the S&P 500, “as measured by the prices of VIX futures contracts,” as ProShares explains.
• ProShares VIX Mid-Term Futures ETF (VIXM), which “provides exposure to the S&P 500 VIX Mid-Term Futures Index, which measures the returns of a portfolio of monthly VIX futures contracts with a weighted average of five months to expiration,” as also noted by ProShares.

In short, when markets become as crazed as they’ve been lately, there are safe ways to invest for higher volatility.