PHDG Invesco S&P 500 Downside Hedged ETF

The end is near!

Well, sort of.

The coming Mayan Apocalypse, which begins on December 21^st, is by many accounts just the end of the Mesoamerican Long Count Calendar and nothing more. Basically, the Mayans thought that writing out the calendar up to now was good enough, although a few are hoping or planning that it will be a cataclysmic event instead.

The theories for the end are quite varied, and range from a black hole or planet appearing to smash us to bits, to solar flares and other cosmic issues leaving Earth inhabitable. All of these seem a little farfetched to me, but I have been wrong before, so maybe some caution is a good idea anyway (see Three Excellent Dividend ETFs for Safety and Income).

Due to this, a look to some top ETFs that seem poised to do well in this type of Doomsday environment could be in order. After all, for those who make it to next week, portfolios will remain a top concern, as they could be in for a volatile end of the year stretch (with the impending end of the world and all).

So in case I don’t make it past the End of Days, you should consider taking a closer look at a few of the ETFs below which could offer up some excellent protection in a post-Mayan Apocalypse world:

Hedged ETFs

If an apocalyptic event actually does happen, it could be a great idea to hedge a portfolio with some volatility exposure. However, if the world doesn’t come to an end and markets continue to rise, an investment that focuses on stocks seems to be the better play.

Given this, a product that dynamically combines an investment in volatility with one in equities could make for a great pick. This type of investment seems poised to outperform broad benchmarks during rocky environments, while still offering up solid gains during steady market climates, especially when compared to a pure volatility investment.

Investors currently have two quality choices in this space, the S&P VEQTOR ETN (VQT) and the PowerShares S&P 500 Downside Hedged Portfolio (PHDG). These two dynamically allocate capital between volatility, equity, and cash, moving more towards volatility as implied levels and realized levels in the VIX rise.

In this way, the two look to be heavier in volatility during rocky times while riding stocks during lower risk market periods (see PowerShares Debuts Hedged Broad Market ETF).

The main difference between the two is structure as PHDG is an ETF while VQT is an ETN. Additionally, PHDG is far cheaper at just 39 basis points, though it sees less in volume than its Barclays cousin, as VQT has far more in assets despite its 95 basis point fee.

Gold ETFs

Not only was gold a popular choice in pre-Columbian civilizations, but it remains a solid option for portfolios today. The metal is also a great hedge during uncertain market environments, and when things breakdown, it is a good fall back as a last-ditch currency.

This makes gold a popular safe haven investment and a great diversifying agent for portfolios. While investors can certainly buy up gold bullion, a more liquid—and cheaper—option is gold ETFs.

These products, like GLD, IAU, and SGOL, cost investors a fraction of what we see in the ‘traditional’ gold space, while they are all more liquid choices with tight bid ask spreads as well (read The Comprehensive Guide to Gold ETF Investing).

While gold ETFs have had a rough going in recent trading sessions, they could be better poised in the months ahead, especially if volatility picks up or if any ‘black swans’ creep into the picture. Besides the apocalypse, investors still have to worry about U.S. budget issues, Middle East tensions, Europe, and a freewheeling Federal Reserve, suggesting that there certainly could be a bullish case for gold in 2013.

Mexico ETFs

The Mayan civilization dominated the southeast part of Mexico in what today we know as the Yucatan Peninsula. Somewhat unsurprisingly in light of the Mayan ‘prediction’, many have flocked to the region in anticipation of 12/21/12.

Some reports suggest that up to 200,000 people are going to be at Chichen Itza—arguably the most impressive of the surviving Mayan landmarks—giving a nice boost to Mexican tourism in the process. This added bump in tourism is also coming at a time when the Mexican economy is surging anyway, meaning that the Mayan homeland could also be a prime investment opportunity for those planning on surviving the apocalypse (read Best Latin America ETFs for 2013: Mexico).

The country has seen strong growth levels this year despite ongoing drug violence, while the resurgence of the United States has definitely boosted Mexico as well. Thanks in part to this, the top way to play Mexico via ETFs, the iShares MSCI Mexico Index Fund (EWW), has actually added more than 27% YTD, crushing both broad emerging market benchmarks, and the U.S. market as well.

While it is true that the fund has seen significant volatility this year, we fully expect the first part of 2013 to be another solid period for EWW. In fact, we currently give the fund a Zacks ETF Rank of 1 or Strong Buy, suggesting that outperformance could be in the cards for this ETF once more.

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Follow @Eric Dutram on Twitter

Author is long IAU and gold bullion.

 
ISHARS-MEXICO (EWW): ETF Research Reports
 
SPDR-GOLD TRUST (GLD): ETF Research Reports
 
ISHARS-GOLD TR (IAU): ETF Research Reports
 
PWRSH-SP5 DHP (PHDG): ETF Research Reports
 
BARCLY-SP VEQTR (VQT): ETF Research Reports
 
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