Investopedia

Continue to Site »

Inverse ETF

Filed Under » ,
Dictionary Says

Definition of 'Inverse ETF'

An exchange-traded fund (ETF) that is constructed by using various derivatives for the purpose of profiting from a decline in the value of an underlying benchmark. Investing in these ETFs is similar to holding various short positions, or using a combination of advanced investment strategies to profit from falling prices.

Also known as a "Short ETF," or "Bear ETF."
Investopedia Says

Investopedia explains 'Inverse ETF'

One advantage is that these ETFs do not require the investor to hold a margin account as would be the case for investors looking to enter into short positions.

There are several inverse ETFs that can be used to profit from declines in broad market indexes, such as the Russell 2000 or the Nasdaq 100. In addition, it is possible to buy inverse ETFs that focus on a specific sector, such as financials, energy or consumer staples. Most investors look to purchase inverse ETFs so that they can hedge their portfolios against falling prices.

Related Video for 'Inverse ETF'

Articles Of Interest

  1.

    4 Ways To Use ETFs In Your Portfolio

    To take full advantage of these vehicles, you need to know how they can fulfill certain strategies.

  2. 5 Reasons Why ETFs Work For Young Investors

    ETFs contain all of the characteristics that make them the perfect investment opportunity for young investors.

  3. Inverse ETFs Can Lift A Falling Portfolio

    These funds can reduce your exposure to market risk or enhance portfolio performance.

  4. Leveraged ETFs: Are They Right For You?

    This specialty vehicle offers dramatic results, but can also magnify risk.

  5. Shorting ETFs: Profit Or Peril?

    Although more detail and attention may be needed, ETFs can be shorted - and at a great profit.

  6. An Inside Look At ETF Construction

    If you're an investor who likes to understand how and why your investment products work, this article is for you!

  7. Introduction To Exchange-Traded Funds

    Get into ETFs and enjoy the benefits of a mutual fund with the flexibility of a stock.

  8. An Introduction To Exchange-Traded Funds (ETFs)

    Exchange-traded funds (ETFs) offer investors the ability to diversify over an entire sector or market segment in a single investment. Find out how they are created and what they can do for your ...

  9. Exchange-Traded Funds (ETFs)

    This vehicle combines the diversification of a mutual fund with the flexibility of a stock. Learn more about them here.

  10. Women: Invest In Your Financial Literacy

    Learning about money may seem intimidating, but it's not as hard as it looks.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center