Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

2 Inverse ETFs To Help Protect Portfolios From Ongoing Wall Street Declines

By Investing.com (Tezcan Gecgil/Investing.com )ETFsJan 24, 2022 21:10
au.investing.com/analysis/2-inverse-etfs-to-help-protect-portfolios-from-ongoing-wall-street-declines-200497749
2 Inverse ETFs To Help Protect Portfolios From Ongoing Wall Street Declines
By Investing.com (Tezcan Gecgil/Investing.com )   |  Jan 24, 2022 21:10
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Inverse and leveraged exchange-traded funds (ETFs) typically replicate the reverse or the leveraged (usually twice or three times) of the returns of an index daily. Assets in such products increased from around $90 billion in 2020 to over $121 billion in 2021.

Given the recent declines in broader markets, many investors are looking for ways to protect their portfolios or take advantage of the negative sentiment on Wall Street. We have previously outlined several inverse products.

Today's article introduces two other inverse funds that could appeal to experienced short-term traders. However, as in our previous discussions, we should remind readers that these ETFs are not suitable as long-term investments. Instead, they should potentially be used on a short-term basis for hedging or speculative purposes. Finally, such specialized funds typically have high expense ratios, affecting total returns.

1. ProShares Short S&P 500

  • Current Price: $14.73
  • 52 Week Range: $13.47 - $18.20
  • Expense Ratio: 0.88% per year

Our first fund, the ProShares Short S&P 500 (NYSE:SH), aims to achieve daily returns that correspond to the inverse (-1x) of the daily returns of the S&P 500 index. The fund was first listed in June 2006, and net assets stand around $1.4 billion.

SH Weekly
SH Weekly

In 2021, the SPDR® S&P 500 (NYSE:SPY), the most important ETF that tracks the S&P 500, returned more than 27.5%. However, in the first three weeks of January, SPY declined 7.8%.

On the other hand, SH has returned 8.1% so far in 2022. Short-term traders looking to short the S&P 500 index daily could consider allocating a small part of their portfolio to a fund like SH.

2. AdvisorShares Ranger Equity Bear ETF

  • Current Price: $25.89
  • 52 Week Range: $22.67 - $28.60
  • Expense Ratio: 3.36% per year

Our second fund, the AdvisorShares Ranger Equity Bear ETF (NYSE:HDGE), is an actively-managed short-only fund. In other words, it does not duplicate inverse returns of a given fund. Therefore, it is not necessarily an inverse fund but rather a 'bear' ETF.

HDGE Weekly
HDGE Weekly

HDGE, which typically shorts stocks with low earnings quality, has about $65.5 million in net assets. The ETF started trading in January 2011, and currently has 55 holdings.

Fund managers can also add tactical trading positions depending on market sentiment. The ETF's (short) sector exposure includes: information technology (29.1%), consumer discretionary (14.5%), industrials (7.0%) and telecom services (6.6%).

Among those names currently shorted are the clothing company Hanesbrands (NYSE:HBI); Snap-On Inc (NYSE:SNA), which provides equipment primarily to auto mechanics; biofuel energy name Renewable Energy Group (NASDAQ:REGI); Restaurant Brands International (NYSE:QSR), which owns Burger King, Popeyes, Tim Hortons, and Firehouse Subs; and website-building platform Wix.com (NASDAQ:WIX).

So far this year, HDGE is up about 5% but down 15.9% over the past 12-months. The fund might be appropriate for a range of investors feeling a disconnect between frothy valuations in the companies in HDGE and current macroeconomic conditions.

On a final note, 3% of HDGE is currently invested in another ETF, namely the ProShares Short Russell 2000 (NYSE:RWM).

RWM Weekly
RWM Weekly

Many institutional investors regard the Russell US indices as key benchmarks. For instance, the Russell 3000 index represents around 98% of all investable US shares, and encompasses numerous sub-indices.

Of those, the small-cap Russell 2000 index is widely followed. Many investors include the iShares Russell 2000 ETF (NYSE:IWM), which tracks the returns of this index, in their portfolio. Since the start of 2022, IWM has lost close to 11.5%.

On the other hand, the RWM fund seeks to return the inverse (-1x) of the Russell 2000 Index on a daily basis. Therefore, it could be an appropriate hedging or short-term trading tool for some readers.

This fund began trading in January 2007, and has over $275 million under management. So far in January, RWM is up 12.4%.

2 Inverse ETFs To Help Protect Portfolios From Ongoing Wall Street Declines
 

Related Articles

2 Inverse ETFs To Help Protect Portfolios From Ongoing Wall Street Declines

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email