Investors have long been told the advantages of taking a long-term view with their investments – to buy-and-hold, in other words. But the volume and assets trickling into bearish exchange traded funds signal that there are many investors not content to take this bear market lying down.
Risk-averse investors have been taking haven in Treasuries and gold, but those who want to capitalize on the market’s negative direction these days and don’t mind risk are willingly taking on bearish ETFs.
Such ETFs move opposite, twice the opposite or three times the opposite of the market’s daily direction. For example, if the S&P 500 fell 2% in one day, a double leveraged bear fund would gain 4%.
At the end of 2008, inverse and leveraged funds dotted the top of the performance charts for the year. We’re seeing that all over again nearly halfway through 2010. Funds by Direxion and ProShares, Market Vectors and PowerShares are dominating the charts. Among the leaders:
- PowerShares DB Agriculture Double Short ETN (NYSEARCA:AGA)
- Market Vectors Double Short Euro ETN (NYSEARCA:DRR)
- ProShares UltraShort Euro (NYSEARCA:EUO)
- Direxion Daily 30-Year Treasury Bull 3x (NYSEARCA:TMF)
Be aware that these funds need daily monitoring and cannot be forgotten about. Volatile markets make for volatile swings in these funds that can cause you to lose big if you’re not careful. But as many investors are finding these days, leveraged and inverse funds have real benefits when handled with care.
Tisha Guerrero contributed to this article.