3 Best Inverse ETFs to Short the Stock Market

Inverse ETFs allow investors to bet against, or “short” the market. In this video we’ll look at the best inverse ETFs to profit from stock market downturns.

// TIMESTAMPS:

00:00 - Intro
00:27 - What are inverse ETFs?
01:32 - SH
01:57 - SDS
02:27 - SPXU
03:01 - Where to buy these ETFs
03:23 - Disclosure
03:49 - Disclaimer
04:20 - Outro

// PARTIAL TRANSCRIPT:

What are inverse ETFs and why should you care?

Inverse ETFs can be a market timer’s best friend. They allow bears to short, or bet against, the market. That is, when stocks drop, the value of these ETFs goes up.

Inverse ETFs are best used over the short term since the underlying derivatives contracts are settled daily by the fund manager. These funds allow investors to short the market without using a margin account. Bears who use inverse ETFs usually target the S&P 500, as inverse ETFs for the index have the greatest liquidity, and the S&P 500 is considered a proxy for the broader stock market.

Here are the 3 best inverse ETFs to short the S&P 500. They all come from ProShares, one of the leading providers of inverse and leveraged ETFs.

First up is SH, the ProShares Short S&P 500. SH is the most popular inverse ETF, with nearly $3 billion in assets. The fund provides a -1x daily return of the S&P 500 Index. If the S&P 500 Index drops by $1, this ETF will rise by roughly $1. This ETF has an expense ratio of 0.89%.

Next is SDS, the ProShares UltraShort S&P500. Those desiring a little more volatility may want to use leveraged funds. The ProShares UltraShort S&P500 (SDS) is a leveraged inverse ETF providing -2x daily returns of the S&P 500. This fund has over $1.1 billion in assets and an expense ratio of 0.90%.

There’s also a -3x ETF. It is SPXU. The ProShares UltraPro Short S&P500 delivers -3x daily returns of the S&P 500. This ETF has an expense ratio of 0.91%. Traders making a short-term bet on an impending crash may want to use this -3x ETF to get the most bang for your buck, since its expense ratio is only slightly higher than that of SH.

#investing #etfs #leverage

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Read up on the fundamentals of leverage and the nature of leveraged ETF products. Using leverage increases the potential for greater returns but also the potential for greater losses. The use of leverage increases portfolio risk, and investors face a real possibility of losing all money invested. Specifically with leveraged ETFs, these are relatively new, exotic products that behave differently than “regular,” unleveraged index ETFs. Do your own due diligence and read the fine print.

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