Inverse ETFs, Should You?

Inverse ETFs or short ETFs allow you to profit from a falling market. If you think a specific sector, or index will go down you can profit from that move by buying the inverse ETF.

The nice thing about these ETFs is that you can use them to profit from a downward move in the market without needing a margin account, like you would need if you were going to short.

So Should You Use Short EFTs?

Well the answer really depends. If you are a long term investor who is willing to buy a stock and hold onto it for 10 years don’t buy them.

History has proven time and time again that stocks do go up on average in the long term. If you were to buy an inverse ETF today and wait 10 or 20 years you would probably have successfully cut your account in half.

So now that we have got that out of the way, these funds can be very, very profitable, if you treat them as a trade and follow all of your trading rules. Having precise entry and exit rules that allow you to cut your losses short and let your winners ride is a must here.

Any trading rules you have made become increasingly important to follow when using them or any other creative stock market techniques. You do not have the luxury of waiting for the long haul if things do not immediately go your way.

So if you have been seeing success as a trader in the markets go ahead and approach these. They can be quite useful, especially when you get into the Ultra Shorts and 3x shorts. If you are not having success as a trader I would recommend not getting involved in them until you feel comfortable.

list of Short ETFs

If you think you are ready to take a step in this direction here is a list of inverse ETFs that can help get you on your way.

PSQ – Short the Nasdaq

DOG – Short the Dow

SH – Short the S&P

RWM – Short the Russell