Why I Just Bought the Stock Market's Fear Index
When should investors be fearful, according to Warren Buffett? When others are greedy. And a lot of people are greedy right now. The stock market is at all-time highs. Many investors have jumped aboard skyrocketing stocks that, quite frankly, don't deserve their impressive gains based on their underlying business prospects.
One way to be fearful and still make money is to buy the market's so-called "fear index." The CBOE Volatility Index (VOLATILITYINDICES: ^VIX), commonly referred to as the VIX, technically tracks the volatility of S&P 500 index options. But the VIX can rightfully be called a fear index because volatility rises as investors' fears grow.
I recently bought the iPath Series B S&P 500 VIX Short-Term Futures ETN (NYSEMKT: VXX) -- which attempts to track the VIX. However, I didn't do so to heed Buffett's well-known advice. Here's why I decided to buy the market's fear index via this exchange-traded note.
Source Fool.com
