The recent market downturn has seen a wide range of forecasts from experts as to where the bottom' of the market will be. With the sheer disparity and variation in these forecasts, it only tells us that predicting the extent of a bear market is no easy task.

As there is downside risk hanging over the global economy, financial markets are brimming with uncertainty, which is a key factor that leads to volatility. In recent weeks, we've seen some of the sharpest daily and weekly falls in ASX history, yet also some of the index best daily gains as well.

The S&P/ASX200 VIX Index is a measure of implied volatility across the market and defines what sort of expectations of near-term volatility have been priced into the ASX. Since February 20, 2020, this index has skyrocketed as much as 250%. In fact, the index has been trading at levels similar to those of the GFC, when even then the ASX didn't see daily movements like we have been witnessing.

Notwithstanding this trend, many investors are still investing in stocks. However, reasons differ from one investor to the next. In some instances, traders are looking to exploit the volatility for quick gains, while in other cases, individuals are investing in shares that they believe will come good over the long-term. But there is also another reason why some investors are still investing in shares, and that is to provide protection to their portfolio.

Investing in shares that provide portfolio hedging

As we have previously discussed, gold ETFs and gold mining stocks are sometimes seen as a portfolio hedge when economic uncertainty arises and markets turn south. However, during a bear market, while the price of gold is likely to do well as investors search for a safe haven, even these investments can come under selling pressure, at least temporarily.On the other hand, today there are a series of ETFs that are designed to inversely follow the broader stock market. These include the BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR), the BetaShares US Equities Strong Bear Hedge Fund - Currency Hedged (ASX: BBUS), and the BetaShares Australian Equities Strong Bear Hedge Fund (ASX: BBOZ).Investing in shares (ETFs) that are inversely correlated to the market effectively allows you to short' the market, betting that the ASX 200 and S&P 500 will decline. Some investors take positions in these ETFs to hedge' the value of their other holdings. That is, if the market falls, gains from the short-ETFs will offset overall portfolio losses. Some investors choose to move exclusively into these ETFs, however, as we will discuss, there is considerable risk in doing so.Since the start of the year, more than $250 million of capital has flowed into these ETFs, with their assets more than doubling. In fact, volumes across the trio of short-oriented ETFs is reportedly 30 times higher than average trading volumes.

In terms of their specific function, each of the short ETFs are different. BEAR' is designed to inversely follow the S&P/ASX 200 Accumulation Index, where for every 1% decline the index records, the ETF stands to deliver returns of 0.9% to 1.1%.

The BBOZ' ETF also tracks the same index, however, it is highly leveraged. This means that gains (and losses) are magnified. So for every 1% fall (or gain) in the ASX 200 Accumulation index, BBOZ can swing 2% to 2.75% in the opposite direction. Similarly, the BBUS' ETF operates with the same leverage, albeit tracks the S&P 500 Total Return Index. It is important to note that due to their leverage, these are highly volatile ETFs with considerable risk. It is wise to refrain from relying exclusively on these products to provide market exposure.

Portfolio monitoring and balancing

Regardless of whether you choose to purchase bear ETFs or continue investing in shares for the long-term, you should follow one common practice. That is, you should keep a close eye on your portfolio and make the necessary adjustments to ensure that your portfolio is still aligned with your goals and your broader risk appetite.During a volatile market, you may want to consider the weighting of certain stocks or sectors that make up your portfolio. Asset allocation and portfolio rebalancing are vital tools in a bear market. Are your investments still appropriate for what you want to achieve? Are there losses that you should cut, or profits that you should take? Do you feel comfortable holding onto your core holdings for the long-term, or could you allocate that money for better returns elsewhere?Make sure that you weigh up both the macroeconomic risks as well as company-specific risks that each of the stocks in your portfolio are likely to face. As we have seen over the last month, the market sell-down might be broad in nature, however, there are often sectors that are more exposed than others.Finally, keep in mind that if you choose to make any adjustments to your portfolio, then you may incur tax obligations. On top of that, you forgo any future dividends and compounding returns that may have been possible, although if you are investing in shares that provide portfolio hedging, you may well just end up preserving your capital to fight' another day.