Covered Call Funds
These funds sell covered calls (the right for others to buy their stock holdings at a set price) which bring in extra income that will help in a downturn.
Options are safer than bonds because unlike bonds, the options you write always move in the opposite direction of stocks. However, the downside of such investment strategy is if the stocks rise a lot, your gain will be limited. Also, such funds could still go down if the extra income brought in by the options not enough to offset the stock holdings' declines.
An example of covered call funds is PowerShares S&P 500 BuyWrite Portfolio (PBP).
In our next blog post, we will discuss a third option investors could consider in a choppy market - Convertible Bonds.