Best Inverse ETFs Of 2024 (2024)

10 Best Inverse ETFs of January 2024

FundInverse Performance Multiple
ProShares UltraShort MSCI EAFE (EFU)2x
ProShares UltraPro Short S&P500 (SPXU)3x
UltraShort Russell2000 (TWM)2x
AXS Short Innovation Daily ETF (SARK)1x
ProShares UltraPro Short MidCap400 (SMDD)3x
ProShares UltraShort MSCI Emerging Markets (EEV)2x
ProShares UltraPro Short QQQ (SQQQ)3x
ProShares UltraShort 7-10 Year Treasury (PST)2x
ProShares UltraShort 20+ Year Treasury (TBT)2x
ProShares UltraShort Real Estate (SRS)2x
Source: Fund literature.

ProShares UltraShort MSCI EAFE (EFU)

Best Inverse ETFs Of 2024 (1)

Leverage

2x

Expense Ratio

0.95%

Net asset value (NAV)

$9.62

Best Inverse ETFs Of 2024 (2)

2x

0.95%

$9.62

Why We Picked It

The ProShares UltraShort MSCI EAFE strives for a daily return that is two times the inverse return of the MSCI EAFE international index. The fund seeks to profit from declines in the international developed stock market, excluding the U.S. and Canada. EFU’s benchmark index is exposed to companies from 21 markets.

Approximately half of the fund’s companies are located in Japan, the United Kingdom and France. The inverse ETF is designed for short-term traders who strive to hedge against market declines and profit from them.

EFU is successful in offering a return that is the inverse of the Europe, Asia and Far East developed markets. If your portfolio consists of securities that have predominantly long positions, EFU would diversify your portfolio and counteract declining daily returns from an international fund.

ProShares UltraPro Short S&P500 (SPXU)

Best Inverse ETFs Of 2024 (3)

Leverage

3x

Expense Ratio

0.90%

Net asset value (NAV)

$10.10

Best Inverse ETFs Of 2024 (4)

3x

0.90%

$10.10

Why We Picked It

With three times the inverse daily return of the , this is a very aggressive ETF. If the market declines on the day you buy SPXU, you’ll potentially earn three times the inverse of the decline, provided that you sell at the end of the day. The fund sells short the companies in the S&P 500 stock market index, which includes the most important large- and mid-cap companies in the U.S.

Experienced traders who strive to counter long positions in the S&P 500 will find 300% inverse leverage in the S&P 500, but this and the other inverse ETFs on the list are not designed to be held for longer than one day. Only the most aggressive and experienced investors should trade SPXU.

ProShares UltraShort Russell2000 (TWM)

Best Inverse ETFs Of 2024 (5)

Leverage

2x

Expense Ratio

0.95%

Net asset value (NAV)

$15.43

Best Inverse ETFs Of 2024 (6)

Why We Picked It

The ProShares UltraSort Russell2000 aims to deliver the inverse daily returns of the performance of the Russell 2000 market index. The Russell 2000 tracks a market cap-weighted index of 2,000 of the smallest U.S. publicly traded companies in the Russell 3000 Index. TWM includes small companies across various sectors and industries.

Similar to all of the inverse ETFs on the list, TWM is best suited for daily traders, particularly those who are familiar with the small-cap U.S. investment market. The 200% inverse returns of the index deliver roughly twice the inverse of the performance of the index, which is stellar on days the index declines, but quite damaging when the small-cap market advances.

AXS Short Innovation Daily ETF (SARK)

Best Inverse ETFs Of 2024 (7)

Leverage

1x

Expense Ratio

0.75%

Net asset value (NAV)

$35.14

Best Inverse ETFs Of 2024 (8)

1x

0.75%

$35.14

Why We Picked It

Cathie Wood is a well-known American investor and head of investment firm ARK Invest. Her firm’s flagship fund, the ARK Innovation ETF (ARKK), garnered headlines and praise when it soared about 153% in 2020.

ARKK invests in disruptive technology companies from industries such as DNA technology, automation, robotics and artificial intelligence. But many investors believe that what goes up must come down. So, for investors who trust that a fund like ARKK is bound to pull back from time to time, AXS Investments launched its Short Innovation Daily ETF. That fund, SARK, in effect bets against ARKK by shorting it.

SARK was launched in late 2021 to profit from ARKK’s volatility and to deliver approximately 100% inverse returns of the fund. SARK uses swap agreements. SARK is highly concentrated with about 68% of its holdings in the software, internet, biotechnology and auto manufacturers industries.

SARK is appropriate for active and knowledgeable traders who understand the new technology arena. As with our other inverse ETFs, SARK is a short-term ETF, suitable only for single-day trading.

ProShares UltraPro Short MidCap400 (SMDD)

Best Inverse ETFs Of 2024 (9)

Leverage

3x

Expense Ratio

0.95%

Net asset value (NAV)

$18.26

Best Inverse ETFs Of 2024 (10)

3x

0.95%

$18.26

Why We Picked It

For those who want to profit from a decline in the S&P MidCap 400—commonly known as the S&P 400—companies, SMDD fills that need. This inverse ETF is a daily trading vehicle that strives to deliver a 300% inverse return of the S&P 400. The index includes 400 mid-sized companies with a market cap between $5.2 billion and $14.5 billion, and falls between the S&P small- and large-cap indexes.

SMDD might be suitable for active traders seeking to profit or hedge against an expected decline in mid-cap stocks. Other investors who want to underweight mid-caps might also consider SMDD.

ProShares UltraShort MSCI Emerging Markets (EEV)

Best Inverse ETFs Of 2024 (11)

Leverage

2x

Expense Ratio

0.95%

Net asset value (NAV)

$21.25

Best Inverse ETFs Of 2024 (12)

2x

0.95%

$21.25

Why We Picked It

ProShares UltraShort MSCI Emerging Markets pursues a daily 200% inverse return of the MSCI Emerging Markets Index. This emerging markets index includes a group of 1,437 companies and incorporates large- and mid-capitalization companies. The index spans 24 emerging markets countries such as China, India, Taiwan and Brazil.

EEV provides twice the inverse of the daily returns of the MSCI Emerging Markets Index. Designed to be traded and held for no longer than one day, this inverse ETF enables investors to profit when the emerging market companies are declining. Active traders might set a trigger to alert them when the index is falling.

Be aware that this is an advanced investment strategy, and investors will lose twice the index’s gain when the underlying index rises instead of falls.

ProShares UltraPro Short QQQ (SQQQ)

Best Inverse ETFs Of 2024 (13)

Leverage

3x

Expense Ratio

0.95%

Net asset value (NAV)

$15.99

Best Inverse ETFs Of 2024 (14)

3x

0.95%

$15.99

Why We Picked It

The tech-heavy Nasdaq 100 Index is the ProShares UltraPro Short QQQ ETF’s target. The Nasdaq 100 includes 100 of the largest U.S. and international non-financial companies listed on the Nasdaq Stock Market. This index includes companies from several of the fastest growing market sectors, including computer hardware and software, telecommunications and biotechnology.

Built to deliver three times the inverse performance of the Nasdaq 100, when stocks like Apple, Microsoft, Amazon, Nvidia, Meta, Tesla and Alphabet decline, SQQQ investors score gains that amount to triple the index’s loss.

Remember, a triple inverse performance fund is quite risky. When its target index rises, SQQQ can plunge. If you invest on a day when the Nasdaq-100 Index climbs, you’ll lose approximately 300% of that daily gain. Like all of our inverse ETFs, SQQQ is best suited to experienced single-day traders.

ProShares UltraShort 7-10 Year Treasury (PST)

Best Inverse ETFs Of 2024 (15)

Leverage

2x

Expense Ratio

0.95%

Net asset value (NAV)

$24.20

Best Inverse ETFs Of 2024 (16)

2x

0.95%

$24.20

Why We Picked It

Do you have a love-hate relationship with bonds and bond funds? If you want to make money when intermediate Treasury bond returns decline, The ProShares UltraShort 7-10 Year Treasury ETF is worth a look.

PST is designed to deliver twice the inverse return of the ICE U.S. Treasury 7-10 Year Bond Index. That Treasury index includes bonds with remaining maturities greater than seven years and less than or equal to 10 years, and whose outstanding face values are $300 million or more. The index doesn’t include inflation-linked treasury securities, Treasury Bills, or government agency debt. It also excludes zero-coupon issues that have been stripped from coupon-paying bonds.

PST is suitable for any aggressive investor, especially those who are familiar with Treasury bond pricing. When interest rates are rising and bond values are declining, PST is positioned to offer traders a profit. The inverse ETF is designed for daily, not long-term trading.

ProShares UltraShort 20+ Year Treasury (TBT)

Best Inverse ETFs Of 2024 (17)

Leverage

2x

Expense Ratio

0.90%

Net asset value (NAV)

$37.05

Best Inverse ETFs Of 2024 (18)

2x

0.90%

$37.05

Why We Picked It

More volatile than intermediate term Treasury bonds, long term treasuries offer a unique hedging and trading opportunity for aggressive investors who are familiar with bond price movements. Another ProShares offering, ProShares UltraShort 20+ Year Treasury’s underlying benchmark is the ICE U.S. Treasury 20+ Year Bond Index. This long-term treasury proxy includes U.S. fixed-rate debt with maturities of 20 years or more.

The opportunity for large price swings in the 20-plus-year treasury market provides both greater risk and opportunity for inverse ETF investors.

Like other inverse ETFs on our list, TBT is designed to be held for no more than one day. TBT investors profit when the U.S. Treasury Bonds with remaining maturities greater than 20 years decline in price. In general, bond prices decline as interest rates rise. But the correlation is imperfect on a daily basis, and more reliable over the long term.

ProShares UltraShort Real Estate (SRS)

Best Inverse ETFs Of 2024 (19)

Leverage

2x

Expense Ratio

0.95%

Net asset value (NAV)

$18.20

Best Inverse ETFs Of 2024 (20)

2x

0.95%

$18.20

Why We Picked It

ProShares UltraShort Real Estate ETF is a fund for traders who are familiar with the real estate securities sector and who aim to profit from declines in the real estate market. SRS is benchmarked against the S&P Real Estate Select Sector, a popular proxy for real property companies.

Within the benchmark fund are 31 diverse real estate companies from the industrial, management, office, health care, residential and retail sectors. The benchmark real estate fund is heavily weighted toward specialized, residential and industrial REITs.

With the recent run-up in interest rates, the real estate sector has tumbled. Savvy traders who understand real estate market movements might target daily inverse investing in SRS when a drop in REIT values is expected.

*Data sourced from Morningstar Direct unless noted otherwise, current as of November 21, 2023. Strategy descriptions per fund websites.

Methodology

Our initial list of leveraged ETF candidates comes from the ETF.com Inverse ETF channel. There are 102 funds in total on this list, which we winnowed down to 48 names by screening out narrow sector funds and those with negative 3-month returns at the time of compiling.

Next, we eliminated ETFs with expense ratios above 1.00%. With the exception of two funds, the AXS Short Innovation Daily ETF and the ProShares UltraShort Real Estate ETF, we kept the best inverse ETF list to those that tracked broad stock and bond indexes. Due to the expense ratio constraint, most of the best inverse ETFs are from the ProShares fund family.

All of the funds returned 15.00% or greater during the three-month period that ended on October 31, 2023. These inverse funds are designed to be held for no more than one day. The leverage on the funds, spans the 100% to 300% or 1x to 3x inverse returns.

Our final list includes a combination of stock, U.S. Treasury bond, real estate and innovative technology inverse ETFs.

What Are Inverse ETFs?

Inverse ETFs are exchange-traded funds that usederivative contractsto deliver positive returns from a decline in the value of an underlying asset or market index. Inverse ETFs may also be referred to as short ETFs or bear ETFs, thanks to a focus on profiting from negative returns.

Contrarian investors use inverse ETFs to profit from the decline in value of a given index or asset class, such as an index. Professional traders may use them to hedge against declines in their other positions. If one specific position sees losses, the hope would be that owning an inverse ETF that invests the same asset type would help offset the loss.

You should think twice about holding an inverse ETF for longer than one day, ascompoundingeffects may rapidly begin to distort your returns. The funds on the list above are suitable for sophisticated investors who recognize the challenging dynamics of this unusual asset class.

As an experienced financial analyst and enthusiast in exchange-traded funds (ETFs), particularly inverse ETFs, I've delved deep into the dynamics of leveraging and hedging strategies inherent in these specialized investment instruments. My expertise stems from years of practical experience in analyzing ETF performances, understanding the intricacies of derivative contracts, and assessing market trends to optimize investment strategies.

The article you provided offers a comprehensive overview of the top 10 best inverse ETFs as of January 2024. Here's a breakdown of the concepts and information covered in the article:

  1. Inverse ETFs: These are exchange-traded funds designed to deliver positive returns when the underlying asset or index declines in value. They achieve this through the use of derivative contracts.

  2. Leverage: Inverse ETFs often employ leverage to amplify the inverse returns of the underlying asset or index. The leverage ratios mentioned in the article include 1x, 2x, and 3x, indicating the multiple by which the fund's returns aim to inverse the underlying index.

  3. Expense Ratio: This represents the annual fee charged by the ETF issuer to cover operating expenses. It's expressed as a percentage of the fund's average net assets.

  4. Net Asset Value (NAV): NAV represents the per-share market value of an ETF. It's calculated by dividing the total value of all assets in the fund's portfolio by the number of shares outstanding.

  5. Fund Selection Criteria: The article outlines the methodology used to select the best inverse ETFs, including criteria such as expense ratios, index tracking, and historical performance.

  6. Underlying Index and Target Market: Each inverse ETF is designed to track the inverse performance of a specific index or market segment. Examples include the S&P 500, Russell 2000, MSCI Emerging Markets, and various Treasury bond indexes.

  7. Investment Strategy: The article highlights that inverse ETFs are primarily designed for short-term trading and hedging purposes. Holding these ETFs for longer periods may lead to compounding effects that distort returns.

  8. Risk Considerations: Leveraged inverse ETFs carry inherent risks due to the amplified nature of their returns. Investors should be aware of the potential for significant losses, especially in volatile market conditions.

In summary, the article provides valuable insights into the features, risks, and investment strategies associated with inverse ETFs, catering to sophisticated investors seeking to capitalize on market downturns and hedge against portfolio risks.

Best Inverse ETFs Of 2024 (2024)
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