It’s easy to say “buy the dip” when markets can bounce back quickly from a sell-off, but when investors continue swimming in a sea of red, it can be disconcerting. That said, investors can benefit from the short-term market movements with inverse exchange traded funds (ETFs).
As the name explicitly states, inverse ETFs can offer strategic exposure when markets have been heading down the way they have been as of late. Persistent inflation fears and now talks of a recession have been dragging the markets — both stocks and bonds — down for much of 2022.
During times like this, most advisors will tell you to stay invested. Whether it’s with a hedging component that offers safe haven exposure like gold or trying to outpace inflation with commodities, money is better spent staying invested as opposed to remaining on the sidelines in cash.
While leveraged funds aren’t for the novice investor, it also helps to get educated in order to understand what products are out there and add a dose of green to a portfolio that’s been accustomed to seeing mostly red these days. ETF providers like Direxion Investments offer educational resources so investors and advisors alike can understand how to use inverse ETFs that add leverage in order to amplify gains in an up or down market.
Direxion also offers a quick FAQ that answers common questions on leveraged ETFs and how they can integrate with an investor’s portfolio. For the right type of investor, inverse funds can alleviate the market pain that’s been throbbing for most of the year.
Inverse Your S&P Exposure
The S&P 500 has been nothing short of a rollercoaster ride. But born out of these heavy market fluctuations can be opportunity — in this case, the strength of leveraging (literally) inverse funds.
It’s an ideal market scenario given that rallies as of late appear to be losing steam faster than a locomotive during the industrial revolution. Fortunately, when major indexes like the S&P 500 start to nosedive, Direxion has an inverse fund to remedy that.
“We’re in a market where you just can’t hold on to any rallies,” Paul Hickey of Bespoke Investment Group told CNBC. "It’s not surprising given the overall trends we’ve seen over the last several days and I think we’re just going to see more of this going forward.”
To get inverse exposure to the S&P 500, short-term investors can check out the Direxion Daily S&P 500 Bear 3X ETF (SPXS ), which seeks daily investment results equal to 300% of the inverse of the daily performance of the S&P 500 Index. The fund is up 35% within the past month, highlighting the gains that could be had by going the opposite direction of the bulls.
For more news, information, and strategy, visit the Leveraged & Inverse Channel.