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Defense, Defense: Using ETFs To Protect Yourself

With the Dow soaring on Thursday and plunging on Friday, you can’t go running around this market naked. Nope, you’ve got to protect yourself.

And that’s particularly true if you’re trading internationally. As volatile as the US market may be, overseas markets tend to be worse.

But that volatility doesn’t seem to be scaring off investors. Money continues to pour into emerging markets.

In fact, emerging-market equity funds continued to see healthy inflows in the last week of October even as most funds for mature markets like the U.S., Japan and Europe all posted outflows, according to data released by fund-tracker EPFR Global.

Should you follow the money? If you do you should know that overseas valuations also are lofty.

While the S&P 500 trades at 23 times trailing earnings, China's Shanghai Composite is at 32 times earnings. South Korea's is at 35 times earnings and Indonesia's at 29 times, writes the WSJ.

And historically, emerging stocks have swung from boom to bust. This year's 63% boost in the emerging-markets index was preceded by a 54% slide last year, a more painful downdraft than the S&P's 37%

All things considered what’s an investor to do?

Consider diversifying your portfolio with emerging markets currencies, counsels Luciano Siracusano, WisdomTree chief investment strategist.

“It’s a different profile and it’s a way to move away from equities and into something more like a money market,” he says.

And WisdomTree has some products that get the job done. Ahead of the broadcast Siracusano suggested three WisdomTree products – they trade under the ticker CEW, DGS and DEM .


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Trader disclosure: On Oct. 30th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders;; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman Owns Puts (BAC); Finerman Owns (PDE), (FLS), (RIG), (WMT); Finerman's Firm Owns (MSFT), (NOK), (PDE), (RIG) (TGT), (WMT); Finerman's Firm Is Long Puts (AMZN); Finerman's Firm Is Long Puts (BAC); Finerman's Firm Is Long Call Spreads (BAC); Finerman's Firm Is Long (FLS); Finerman's Firm Is Short Calls (FLS); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (UNG), (USO, Terranova Owns(GS); Seymour Is Short Puts (AA); Seymour Is Long Puts (BAC); Seymour Is Long Puts (BX); Seymour Is Long Puts (EEM); Seymour Is Long Puts (F); Seymour Is Short Puts (FXI); Seymour Is Long Puts (LVS); Seymour Is Long Puts (MSFT); Seymour Is Short F (PBR); Seymour Is Long Puts (SBUX)

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