Inverse ETFs
About Inverse ETFs
Inverse funds go up when the thing they name goes down, and they let you do that in an ordinary brokerage account with no margin and no shares to borrow. That convenience is the entire appeal and it hides how badly they work over time.
They reset daily, exactly like the leveraged funds they sit beside, so the return over a month is not the opposite of the underlying's return over that month. Worse, you are betting against an asset class that rises more often than it falls, so the drift is against you before the resetting has done anything. Long-run charts of inverse equity funds grind toward zero, and that is the product working as designed rather than failing.
Read the multiple in the name, because a fund set at one times an index and one set at three times the same index share a direction and nothing else. These are short-term hedging and trading tools measured in days. Anyone using one as a long-term bearish position is paying a great deal for the privilege of being right slowly.
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