Best Inverse ETFs to buy in 2023
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10/1077% of retail CFD accounts lose money.
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?
Copy link to sectionThe table below lists the best inverse ETFs to buy in 2023. 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 symbol | ETF name | Where to Trade |
|---|---|---|---|
| 1 | SQQQ | ProShares UltraPro Short QQQ | Buy SQQQ 77% of retail CFD accounts lose money. |
| 2 | SH | ProShares Short S&P 500 | Buy SH 77% of retail CFD accounts lose money. |
| 3 | HDGE | Advisor Shares Ranger Equity Bear ETF | Buy HDGE 77% of retail CFD accounts lose money. |
| 4 | SOXS | Direxion Daily Semiconductor Bear 3x Shares ETF | Buy SOXS 77% of retail CFD accounts lose money. |
| 5 | RWM | ProShares Short Russell 2000 ETF | Buy RWM 77% of retail CFD accounts lose money. |
1. ProShares UltraPro Short QQQ (SQQQ)
Copy link to sectionThe 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%.
77% of retail CFD accounts lose money.
2. ProShares Short S&P 500 (SH)
Copy link to sectionIf 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.
77% of retail CFD accounts lose money.
3. Advisor Shares Ranger Equity Bear ETF (HDGE)
Copy link to sectionThe 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.
77% of retail CFD accounts lose money.
4. Direxion Daily Semiconductor Bear 3x Shares ETF (SOXS)
Copy link to sectionSOXS 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.
77% of retail CFD accounts lose money.
5. ProShares Short Russell 2000 ETF (RWM)
Copy link to sectionThe 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%.
77% of retail CFD accounts lose money.
Where to buy the best Inverse ETFs
Copy link to sectionTo 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.
77% of retail CFD accounts lose money.
82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
What is an Inverse ETF?
Copy link to sectionIt’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?
Copy link to sectionInverse 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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