Best Inverse ETFs to buy in 2022

Inverse ETFs go up when the market goes down and offer a way to profit during a bear market. In this guide, our experts pick five of the best inverse ETFs to own this year and explain how to buy them.
Updated: Oct 11, 2022
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Inverse ETFs give investors an easy way to short the market without actually shorting. Both the S&P 500 and Nasdaq indexes entered bear market territory in 2022. With prices expected to continue falling, Inverse ETFs have gained in popularity. Our investment experts have selected the best inverse ETFs to buy this year.

What are the top Inverse ETFs to buy?

The table below lists the best inverse ETFs to buy in 2022. You can start immediately by clicking on the buttons or continue scrolling to learn more about each one and why they made our list.

#ETF symbolETF nameWhere to Trade
1SQQQProShares UltraPro Short QQQ
2SHProShares Short S&P 500
3HDGEAdvisor Shares Ranger Equity Bear ETF
4SOXSDirexion Daily Semiconductor Bear 3x Shares ETF
5RWMProShares Short Russell 2000 ETF
List chosen by our team of analysts, updated 07 October 2022

1. ProShares UltraPro Short QQQ (SQQQ)

The ProShares UltraPros Short QQQ ETF seeks to track the Nasdaq 100 index inversely. It aims to produce results that are the opposite of the underlying index. The Nasdaq includes the biggest non-financial companies in the United States and is heavily skewed towards the technology sector, so SQQQ tends to perform best when tech stocks are on the decline. 

An important feature of ProShares is it is a leveraged fund; specifically, it’s a 3X fund. This means it’s designed to move inversely three times as much as the Nasdaq 100. The fund has around $4 billion under management and was launched in 2010. Since then, its value is fallen as the Nasdaq has been rising. However, in 2022 it has experienced strong gains of around 80%, while the index it tracks is down approximately 30%.

2. ProShares Short S&P 500 (SH)

If you want to bet against the S&P 500, the ProShares Short S&P is our experts’ top recommendation. As its name suggests, it inversely tracks the S&P 500 index, which includes 500 of the biggest publicly traded companies in the United States. One difference between SH and other inverse ETFs is that it is not leveraged, providing a less risky approach. 

The ProShares Short was launched in 2006 and has fallen while the S&P 500 has risen. However, like SQQQ above, its price increased in 2022 as the S&P entered a bear market. SH is particularly useful for investors wanting to hedge against a falling stock market and is a popular fund with nearly $3 billion under management.

3. Advisor Shares Ranger Equity Bear ETF (HDGE)

The Advisor Shares Ranger Equity Bear takes a slightly different approach to the other funds on our list. Rather than inversely tracking an index or industry, it seeks to achieve positive returns by shorting stocks listed on U.S. exchanges. It’s an actively managed ETF and its fund manager uses a combination of quantitative and fundamental factors when selecting which equities to short. 

HDGE includes companies of all sizes and industries, although it favours information technology stocks. Like most inverse ETFs, its performance over the long term has been poor and since its inception in 2011, it has been on a steady decline. However, 2022 has proven to be a strong year for the fund, up over 30% from its lows.

4. Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS)

SOXS provides a way to profit from falling prices in stocks involved in developing and manufacturing semiconductors. It’s a 3X leveraged fund that seeks to provide three times the opposite movement of a basket of semiconductor manufacturers and related technology stocks. 

The Direxion Daily Semiconductor Bear is suited to investors with a short-term bearish outlook on the semiconductor industry. Since its inception over ten years ago, its price has gradually decreased. However, the global semiconductor shortage and supply chain issues have seen its price more than double in 2022.

5. ProShares Short Russell 2000 ETF (RWM)

The final inverse ETF on our list is the ProShares Short Russell 2000. RWM seeks daily investment results that correspond to the inverse of the daily performance of the Russell 2000 Index. The index comprises 2000 of the smallest publicly traded companies in the United States. 

During bear markets, smaller companies tend to perform worse than larger blue chip stocks making RWM a good option for investors seeking to profit from a falling stock market. RWM is also unleveraged, making it less risky than other ETFs on our list. It was launched in 2007 and performed strongly during the recession in 2008 – 2009, although it has lost value since. Its performance in 2022 has been good, with gains of over 20%.

Where to buy the best Inverse ETFs

To buy the best inverse ETFs, you must register with an online brokerage firm that lists them. The table below has some of the best brokers around offering inverse ETFs. Click on any of the links to register an account and buy any of the ETFs on this page.

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What is an Inverse ETF?

It’s an exchange-traded fund available to buy on a stock exchange. Each fund is designed to track the performance of a particular index or industry inversely. While regular ETFs go up when the underlying index moves higher, inverse ETFs go up when the underlying index moves lower.  

Inverse ETFs can also sometimes be leveraged investments which aim to deliver 2X or 3X the returns of an underlying index. Leverage can greatly increase your profits, but remember that the same works for your losses. Inverse ETFs can make a good addition to your portfolio, offer a way to hedge, and let you ‘go short’ without actually having to short the market. 

Are Inverse ETFs a good investment?

Inverse ETFs can be good investments, especially if you buy during a bear market. As bear markets don’t typically last a very long time, inverse ETFs are best suited to a short to medium-term outlook. Using leverage in many inverse ETFs means they’re best suited to experienced investors, although plenty of unleveraged options are available for beginners. 

Timing is an important factor when it comes to investing in the best inverse ETFs. When stock markets enter bearish territory or a specific industry suffers, inverse ETFs can perform well. You can also use inverse ETFs as part of a short-term trading strategy or as a way to hedge against falling stock market prices. 

It is important to weigh your options before investing and having an understanding of the wider economic climate can help you decide if an inverse ETF is the right choice for you. The latest market news and analysis is a good starting point and you can check out any of the pages below for more stock market information.

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Prash Raval
Financial Writer
When not researching stocks or trading, Prash can be found either on the golf course, walking his dog or teaching his son how to kick a… read more.