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."


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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.

  1. Hedge

    Making an investment to reduce the risk of adverse price movements ...
  2. Benchmark

    A standard against which the performance of a security, mutual ...
  3. Derivative

    A security with a price that is dependent upon or derived from ...
  4. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  5. Reverse Gold ETF

    Exchange traded funds that are designed to trade in a direction ...
  6. Inverse Floater

    A bond or other type of debt whose coupon rate has an inverse ...
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