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Asked By :  Parimal
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An investor with an investment objective of speculation wants

An investor with an investment objective of speculation wants to purchase a security that will increase by the same percentage as a decline in the S&P 500 Index. Which of the following securities should be recommended?




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For an investor looking to invest in a security that increases in value by the same percentage as a decline in the S&P 500 Index, an "inverse ETF" (Exchange-Traded Fund) would be appropriate. Inverse ETFs are designed to move in the opposite direction of a particular index, such as the S&P 500. When the index falls, the inverse ETF rises by a corresponding percentage, making it suitable for speculation based on anticipated declines in the index.

It is important for the investor to understand that inverse ETFs can be riskier than regular ETFs and are generally intended for short-term trading, as their value can degrade over time due to fees and market volatility. Additionally, they need to be aware of any specific terms and conditions associated with the ETF they choose. Always ensure that the investor fully understands the product and the associated risks before investing.


Answered By

Sarah Bennett

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