Bear Market ETFs for Informed Investors

As an informed investor, it's essential to know that bear market ETFs can provide a hedge against a downturn in the market. They allow you to profit from a decline in the market, rather than just trying to avoid losses.

Some popular bear market ETFs include the ProShares Short S&P 500 ETF and the Direxion Daily Small Cap Bear 3X Shares ETF, which are designed to perform in the opposite way of the market. The ProShares Short S&P 500 ETF, for example, has a -100% correlation to the S&P 500 Index.

These ETFs use derivatives, such as futures and options, to gain exposure to a decline in the market. This allows them to offer investors a way to profit from a bear market without directly shorting stocks.

Market indexes are often used to measure the performance of a particular market or sector. They can be a useful tool for investors to gauge the overall health of the market.

The S&P 500, for example, tracks the performance of 500 of the largest publicly traded companies in the US. This makes it a widely followed index that can give investors a sense of the overall direction of the market.

Investors can use market indexes to compare the performance of different ETFs, including those that track bear markets.

The S&P 500 is one of the most widely followed market indexes, and for good reason. It's a benchmark for the overall health of the US stock market.

The S&P 500 is tracked by a range of ETFs, including the Short S&P 500 (SH) and the UltraShort S&P 500 (SDS), which offer 1x and 2x inverse leverage respectively.

You can also use the UltraPro Short S&P 500 (SPXU) for 3x inverse leverage.

Here are some of the key S&P 500 ETFs to know:

These ETFs can help you hedge your portfolio or make a statement about the market's direction.

The Russell 2000 is a market index that tracks the performance of the 2,000 smallest publicly traded companies in the US. It's a great benchmark for small-cap stocks.

The Russell 2000 has several inverse ETFs, which allow investors to bet against the index. These ETFs are designed to move in the opposite direction of the index.

One of the most well-known inverse Russell 2000 ETFs is RWM, which has a 1x leverage, meaning it tracks the inverse of the Russell 2000 index.

Other inverse ETFs, like TWM and SRTY, have a 2x and 3x leverage, respectively, and track the inverse of the Russell 2000 index as well.

Here are some of the inverse Russell 2000 ETFs:

These ETFs can be a useful tool for investors who want to hedge their bets or take a contrarian view of the market.

The Dow Jones Industrial Average is a widely followed stock market index that tracks the performance of 30 large-cap companies in the US. It's a key benchmark for the overall health of the US economy.

The Dow Jones Industrial Average has some inverse/short ETFs that allow investors to bet against the market. These ETFs use leverage to amplify the inverse performance.

One example is the Short Dow 30 ETF, which has a ticker of DOG and a leverage of 1x. This means it tracks the inverse performance of the Dow Jones Industrial Average.

Another example is the UltraShort Dow 30 ETF, which has a ticker of DXD and a leverage of 2x. This means it tracks the inverse performance of the Dow Jones Industrial Average, but with twice the daily change.

Here's a list of some of the inverse/short Dow Jones ETFs:

These ETFs can be useful for investors who want to hedge their portfolios or bet against the market. However, it's essential to understand the risks and fees associated with these investments.

Options can be a great way to protect your portfolio in a bear market. They generally cost about 2% to 3% the price of the ETF, making them a low-cost option.

This means investors can open new trades at a low cost, keeping risks small. Options are short-term trading tools, so investors must take profits from time to time.

The December 7 $279 put on the S&P 500 Index ETF gained 411% when the market dropped 3%.

When choosing between defensive and regular ETFs, it's essential to understand the key differences. Defensive ETFs focus on sectors and companies that provide essential goods and services, like healthcare, utilities, and basic consumer products.

These sectors tend to maintain steady revenues during economic downturns, making them a safer bet for investors. This is because people will always need healthcare, utilities, and basic consumer products, regardless of the state of the economy.

Regular ETFs, on the other hand, track broader markets or growth sectors, which can be more volatile and subject to economic fluctuations. This means that regular ETFs may not provide the same level of stability as defensive ETFs.

Defensive ETFs are designed to provide a steady income stream, even during times of economic uncertainty. By investing in defensive ETFs, you can reduce your risk and increase your chances of long-term success.

Protecting your portfolio from market downturns is crucial, and one way to do this is by considering defensive funds. These low-expense ETFs tend to perform well in bearish markets, making them a great addition to your portfolio.

Some top defensive funds to consider include those invested in areas like Utilities, which have historically done well during market downturns. For example, the Utilities sector is represented by Apple Inc and Microsoft Corp, two well-established companies.

Inverse ETFs can also serve as an effective hedging tool for investors with long positions in the S&P 500 Index. By providing inverse exposure to large-cap U.S. equities, inverse ETFs like HSD can help mitigate potential losses during market downturns.

Put options offer another way to reduce risk and increase gains in your portfolio. These options give the buyer the right to sell 100 shares of an ETF at a certain price before a specified time, and can deliver large gains when markets make small moves.

The most you could potentially lose on a put option is just the price you paid to enter the position, which can be as low as 2% to 3% of the ETF's price. This means you can open new trades at a low cost, keeping risks small.

To gain leveraged short exposure to large-cap U.S. equities without the need for a margin account, consider using HSD. This ETF allows investors to access amplified performance while mitigating the risks associated with margin trading.

By incorporating defensive funds, inverse ETFs, and put options into your portfolio, you can protect your investments and potentially enjoy gains during market downturns.

To trade and research Bear Market ETFs effectively, you need a solid online broker. I recommend using our comparison tool and online broker guide to find the best one for you.

Fidelity is a top choice for ETF research, offering advanced tools like ETF screeners, charting, and third-party reports. This makes it easier to find and analyze Bear Market ETFs.

With the right online broker, you can efficiently trade and stay on top of your Bear Market ETF investments.

If you're trading the NASDAQ, you should know about the Inverse / Short NASDAQ ETFs.

These ETFs allow you to bet against the market, which can be a smart move during a downturn. The most popular ones are the 1x, 2x, and 3x leveraged ETFs.

The 1x leveraged ETF is the Short QQQ, with the ticker PSQ, which tracks the Nasdaq 100 index.

The 2x leveraged ETF is the UltraShort QQQ, with the ticker QID, which also tracks the Nasdaq 100 index.

The 3x leveraged ETF is the UltraPro Short QQQ, with the ticker SQQQ, which again tracks the Nasdaq 100 index.

Here's a quick rundown of the NASDAQ inverse ETFs:

Emerging Markets are a great place to explore for traders and investors. Emerging Markets ETFs offer a range of options to take a short position.

The Direxion Emerging Markets Bear 3x ETF (EDZ) is a 3x inverse ETF that tracks the MSCI Emerging Markets Index. This means it aims to return three times the opposite of the index's performance.

If you're looking for a 2x inverse ETF, the UltraShort MSCI Emerging Markets ETF (EEV) is a good option. It also tracks the MSCI Emerging Markets Index, but with a 2x leverage.

For a more conservative approach, the Short MSCI Emerging Markets ETF (EUM) offers 1x leverage and tracks the same index.

Here's a quick rundown of the ETFs mentioned:

If you're looking to trade and research ETFs, I recommend starting with our online broker guide, which can be found in our comparison tool. Fidelity offers the best ETF research tools, including ETF screeners and charting.

Fidelity's overall experience for ETFs is hard to beat, especially when it comes to third-party reports.

Inverse ETFs are designed to increase in value when the index they track goes down, but they don't precisely track the index on the downside.

In 2008, inverse funds overperformed, but they might underperform next time. This is because the chart shows that inverse funds don't always move in the opposite direction of the index.

As a short ETF, ProShares Short S&P 500 (NYSE: SH) should move as much as SPY in percentage terms but in the opposite direction. However, this isn't always the case.

Losses in inverse funds can mount quickly after the bear market ends. In 2009, gains in SDS were gone within five months of the bottom, and gains in SH were gone within a year of the bottom.

The NAV chart shows the historical daily net asset value per unit of an ETF, identifying various distributions made by the ETF. These distributions are not treated as reinvested, and the chart does not account for sales, redemption, distribution, or optional charges.

The NAV values do contemplate management fees and other fund expenses. This means that the fees and expenses are already factored into the chart.

The chart is not a performance chart and is not indicative of future NAV values, which will vary. This is an important note to keep in mind when reviewing the chart.

The Growth of 10K chart represents the value of an initial investment into the ETF of $10,000 since its inception, on a total return basis.