Inverse ETF Funds
Ever wonder how the investment pros make money when the stock market, treasury market, precious metals market or bond market goes down? Well, you’re in luck because we’ll tell you exactly how and it’s very easy. Many high level investors use what are called inverse ETFs, also known as Inverse Exchange Traded Funds. Inverse means, “The Opposite,” so the performance of these investment instruments will always do the opposite as the market.
Say an investor believes that the stock market indices, such as the S&P 500 or Nasdaq, will go down in the near future. They can purchase the inverse ETF fund of these respective markets. If an inverse ETF is purchased and the market goes down 1% then the investor will profit and vice versa if the market went the other way.
In 1993, electronically traded funds, also known as ETFs, were created for investors to invest their money into investment instruments that resembled index mutual funds and trade like stocks. These ETFs have given the retail investors the opportunity to play with the big institutional investors and become more diversified, since they are able to trade major indices, currencies, precious metals and treasury bonds without much investment capital.
We’ll go into detail of all the many options available to investors who are interested in Inverse ETFs as an investment. These indices and markets include the S&P 500, Nasdaq 100, Treasury bond markets, precious metals market, and the currency markets. Remember, there are people make money when the markets go up, but there are also people that make money when the markets go down as well. Essentially, people are, “shorting,” the market, which allows investors to profit when markets or particular investment instruments go down in value.
These inverse ETF investments are for investors who are bearish in any respective market or are hedging their portfolio. They’re either expecting a correction or are protecting their current market gains. Anyone that believes the market will decline should highly research out different available inverse ETFs that are available. Investment capital doesn’t have to be sizable, since anyone, both retail and institutional investors can purchase an inverse ETF.
Investing in an inverse ETF is like any other investment in that there is a certain level of risk that comes along with this type of investment. There are also leveraged inverse ETFs that will allow an investor to make 2x or 3x the daily percentage change. This means that if the market increases 1% for the day and an investor purchased a leveraged 2x inverse ETF then they would have gained 2% return. Leveraged inverse ETFs has a higher beta, since an investor has the potential to gain or lose more than the value of an index.
It’s important to know your own risk level and to make sure you are comfortable with your investment. Completing your own due diligence, research, and analysis is key if you want to compete with Wall Street professionals. The information we provide will give you the information about various types of inverse ETFs that may have a place in your very own portfolio.