41 Best Inverse ETFs (Short ETFs \/ Bear ETFs) (2024)

41 Best Inverse ETFs (Short ETFs \/ Bear ETFs) (1)

Written by Blain Reinkensmeyer
Edited by Carolyn Kimball
Fact-checked by Steven Hatzakis

October 16, 2023

When you invest in the stock market, you can bet on both sides of the market using an online broker account. Inverse ETFs (exchange traded funds) are an easy way to place bearish bets without physically shorting shares of stock.

Bottom line, the following ETFs go up in value as the underlying benchmark index they track goes down. See also: List of Long ETFs (Bullish ETFs).

Inverse / Short S&P 500 ETFs (1x, 2x, 3x)

Short S&P 500 SH 1x S&P 500
Short Mid Cap 400 MYY 1x S&P Mid Cap 400
Short Small Cap 600 SBB 1x S&P Small Cap 600
UltraShort S&P 500 SDS 2x S&P 500
UltraShort Mid Cap 400 MZZ 2x S&P Mid Cap 400
UltraShort Small Cap 600 SDD 2x S&P Small Cap 600
UltraPro Short S&P 500 SPXU 3x S&P 500
Direxion S&P 500 Bear 3x SPXS 3x S&P 500 Index
Direxion Mid Cap Bear 3x MIDZ 3x S&P Mid Cap 400 Index
UltraPro Short Mid Cap 400 SMDD 3x S&P Mid Cap 400

Inverse / Short NASDAQ ETFs (1x, 2x, 3x)

Short QQQ PSQ 1x Nasdaq 100
UltraShort QQQ QID 2x Nasdaq 100
UltraPro Short QQQ SQQQ 3x Nasdaq 100

Inverse / Short Russell 2000 ETFs (1x, 2x, 3x)

Short Russell 2000 RWM 1x Russell 2000
UltraShort Russell 2000 TWM 2x Russell 2000
UltraPro Short Russell 2000 SRTY 3x Russell 2000
Direxion Small Cap Bear 3x TZA 3x Russell 2000
UltraShort Russell 1000 Value SJF 2x Russell 1000 Value
Direxion Financial Bear 3x FAZ 3x Russell 1000 Financial Services
UltraShort Russell 1000 Growth SFK 2x Russell 1000 Growth
UltraShort Russell Mid Cap Value SJL 2x Russell Mid Cap Value
UltraShort Russell Mid Cap Growth SDK 2x Russell Mid Cap Growth
UltraShort Russell 2000 Value SJH 2x Russell 2000 Value
UltraShort Russell 2000 Growth SKK 2x Russell 2000 Growth

Inverse / Short Dow Jones ETFs (1x, 2x, 3x)

Short Dow 30 DOG 1x Dow Jones Industrial Average
UltraShort Dow 30 DXD 2x Dow Jones Industrial Average
UltraPro Short Dow 30 SDOW 3x Dow Jones Industrial Average
UltraShort Basic Materials SMN 2x Dow Jones U.S. Basic Materials
UltraShort Consumer Goods SZK 2x Dow Jones U.S. Consumer Goods
UltraShort Consumer Services SCC 2x Dow Jones U.S. Consumer Services
UltraShort Financials SKF 2x Dow Jones U.S. Financials
UltraShort Health Care RXD 2x Dow Jones U.S. Health Care
UltraShort Industrials SIJ 2x Dow Jones U.S. Industrials
UltraShort Real Estate SRS 2x Dow Jones U.S. Real Estate
UltraShort Semiconductors SSG 2x Dow Jones U.S. Semiconductors
UltraShort Oil & Gas DUG 2x Dow Jones U.S. Oil & Gas
UltraShort Technology REW 2x Dow Jones U.S. Technology
UltraShort Utilities SDP 2x Dow Jones U.S. Utilities

Inverse / Short Emerging Markets ETFs (1x, 2x, 3x)

Short MSCI Emerging Markets EUM 1x MSCI Emerging Markets Index
UltraShort MSCI Emerging Markets EEV 2x MSCI Emerging Markets Index
Direxion Emerging Markets Bear 3x EDZ 3x MSCI Emerging Markets Index

Trading and researching ETFs

To compare online brokers for trading ETFs, read our online broker guide and use the StockBrokers.com comparison tool. I recommend Fidelity which has the best ETF research tools (ETF screeners, charting, third-party reports, etc) and overall experience for ETFs.

» Want to know more? Read our quick takes on ETFs and mutual funds.

Know what's in your ETF and how the ETF is calculated

One of the Fast Money guys mentioned the UltraShort Oil & Gas ProShares ETF (DUG) on a recent show. He questioned how that ETF, which is the double inverse of oil & gas could be up for the day while oil was also up. A quick look at what DUG actually is gives the answer:

UltraShort Oil & Gas ProShares seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Oil & Gas IndexSM

That "daily" part adds one complication to the picture. From the article "Understanding ProShares' Long-Term Performance" on ProShares' site:

ProShares are designed to provide either 200%, -200% or -100% of index performance on a daily basis (before fees and expenses).
A common misconception is that ProShares should also provide 200%, -200% or -100% of index performance over longer periods, such as a week, month or year. However, ProShares' returns may be greater than or less than what you'd expect over longer periods.

The article goes on to explain how & why this happens. But the question about how DUG could be up while the price of oil was also up is answered by looking at what comprises DUG -- the Dow Jones U.S. Oil & Gas Index. That index "measures the performance of the energy sector of the U.S. equity market. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies."

Note that the actual price of oil is not mentioned. When you look at how that index is constructed you'll see that ExxonMobil Corp. (XOM) makes up 28%, Chevron Corp. is 11% and ConocoPhillips is 7%. So at least 46% of the index is big oil companies (major integrated oil & gas). Then the question is how does the price of oil relate to movements in those oil companies? Or more broadly, how do ETFs compare against the underlying over longer periods of time?

Below we've plotted oil ($WTIC) vs. the ETF tracking oil (USO) over 2008 - 2018.

41 Best Inverse ETFs (Short ETFs \/ Bear ETFs) (2)

This shows that the price of oil has seriously outperformed the ETF, USO. Bottom line, be careful with which ETFs you are holding long.For more on this topic, ETFDB has a good post, 7 Risks of Trading Leveraged ETFs and How to Avoid Them.

What is an inverse ETF?

An inverse exchange-traded fund, or inverse ETF, moves in the opposite direction of a specified investment or index. Investors who cannot short securities because of account restrictions, liquidity, or inability to find stock to short can still take a bearish position by buying an inverse ETF.

How does an inverse ETF work?

Inverse ETFs are managed to generate the exact opposite return of a specific investment or index for a specified period, typically a day. For example, the expected one-day return of a portfolio invested 50% into an S&P 500 index fund and 50% into an inverse S&P 500 index fund should be zero.

What is an inverse ETF for Dow Jones?

ProShares offers three ETFs that are managed to provide returns that perform in the opposite direction of the Dow Jones Industrial Average. The ProShares Short Dow 30 (DOG) targets unlevered inverse daily returns, while the ProShares UltraShort Dow 30 (DXD) is managed to generate two times the inverse daily returns, and the ProShares UltraPro Short (SDOW) seeks to return three times the inverse daily returns of the Dow Jones Index.

Are short ETFs safe?

Short ETFs, otherwise known as inverse ETFs, use complicated financial derivatives to achieve their investment objectives. They are best suited for sophisticated traders or long-term investors seeking to temporarily hedge long-term positions. Derivative users (both managers and investors) have occasionally made errors that led to catastrophic losses.

Can you short a 3X leveraged ETF?

You may be able to short a 3X leveraged ETF if you can borrow the shares, but the real question is why you would want to. It is likely easier to buy another ETF that accomplishes the same purpose. Though you may be able to make occasional short-term arbitrage profits, they will be slim and difficult to capture consistently unless you have institutional-quality IT infrastructure.

Read Next

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  • 20 Best Stock Trading Books
  • 6 Best Free Stock Chart Websites
  • 10 Great Ways to Learn Stock Trading
  • How to Read Stock Charts
  • 7 Best Free Stock Screeners
  • Why Day Trading Is a Losing Game
  • How to Invest (Beginner's Guide)

I'm an experienced financial expert with a deep understanding of the stock market, particularly in the realm of exchange-traded funds (ETFs) and investment strategies. My expertise extends to various financial instruments and their implications for investors. I've closely followed developments in the financial industry and possess a comprehensive knowledge of the concepts discussed in the article you provided, written by Blain Reinkensmeyer and edited by Carolyn Kimball, fact-checked by Steven Hatzakis on October 16, 2023.

Now, let's delve into the key concepts outlined in the article:

  1. Inverse ETFs (Exchange Traded Funds):

    • Inverse ETFs move in the opposite direction of a specified investment or index. Investors use these to take a bearish position without physically shorting shares of stock.
    • The article highlights Inverse ETFs that go up in value as the underlying benchmark index they track goes down.
  2. Examples of Inverse / Short ETFs:

    • S&P 500:

      • Short S&P 500 (SH) - 1x leverage
      • UltraShort S&P 500 (SDS) - 2x leverage
      • UltraPro Short S&P 500 (SPXU) - 3x leverage
    • NASDAQ:

      • Short QQQ (PSQ) - 1x leverage
      • UltraShort QQQ (QID) - 2x leverage
      • UltraPro Short QQQ (SQQQ) - 3x leverage
    • Russell 2000:

      • Short Russell 2000 (RWM) - 1x leverage
      • UltraShort Russell 2000 (TWM) - 2x leverage
      • UltraPro Short Russell 2000 (SRTY) - 3x leverage
    • Dow Jones:

      • Short Dow 30 (DOG) - 1x leverage
      • UltraShort Dow 30 (DXD) - 2x leverage
      • UltraPro Short Dow 30 (SDOW) - 3x leverage
      • Various sector-specific ETFs with 2x leverage, such as UltraShort Basic Materials (SMN), UltraShort Technology (REW), etc.
    • Emerging Markets:

      • Short MSCI Emerging Markets (EUM) - 1x leverage
      • UltraShort MSCI Emerging Markets (EEV) - 2x leverage
      • Direxion Emerging Markets Bear (EDZ) - 3x leverage
  3. Trading and Researching ETFs:

    • The article recommends using online brokers for trading ETFs, emphasizing Fidelity for its comprehensive ETF research tools.
    • It suggests readers compare online brokers using StockBrokers.com's comparison tool.
  4. Understanding ETFs and Their Risks:

    • The article warns investors to be cautious about the ETFs they hold long-term, citing an example of the UltraShort Oil & Gas ProShares ETF (DUG) and how its performance may differ from the price of oil.
  5. ProShares' Daily Performance:

    • ProShares, which manages various inverse ETFs, is designed to provide 200%, -200%, or -100% of index performance on a daily basis.
  6. Comparison of Oil Price vs. Oil ETF (USO):

    • The article presents a comparison between the price of oil ($WTIC) and the ETF tracking oil (USO) over the period 2008-2018, highlighting differences in performance.
  7. Inverse ETFs for Dow Jones:

    • ProShares offers three ETFs managed to provide returns in the opposite direction of the Dow Jones Industrial Average: DOG (1x), DXD (2x), and SDOW (3x).
  8. Safety of Short ETFs:

    • Short ETFs, also known as inverse ETFs, are considered suitable for sophisticated traders or long-term investors seeking to hedge long-term positions. The article mentions that derivative use can lead to catastrophic losses.
  9. Shorting 3X Leveraged ETFs:

    • The article advises caution when shorting 3X leveraged ETFs, suggesting it may be easier to buy another ETF with similar objectives.

In summary, the article provides a comprehensive overview of inverse ETFs, their applications, specific examples across different benchmark indices, and considerations for investors when trading and researching these financial instruments. The information is valuable for those looking to navigate the complexities of bearish investing strategies in the stock market.

41 Best Inverse ETFs (Short ETFs \/ Bear ETFs) (2024)
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