7 Best Inverse ETFs for October 2024

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Inverse ETFs are a way that investors can profit from negative returns. In other words, an inverse ETF will go up in value when the underlying security or index it tracks drops in value. If your investment strategy focuses on profiting from negative returns, there are pros and cons to being a contrarian. This is because investments like the S&P 500 index, for example, tend to go up over time.

To profit from an inverse S&P 500 ETF, therefore, you must invest at just the right moment when the broad stock market is going down.

The 7 Best Inverse ETFs 

1. Direxion Daily S&P 500 Bear 3X (SPXS)
2. Proshares Short 20+ Year Treasury (TBF)
3. Proshares Short High Yield (SJB)
4. Proshares Short MSCI EAFE (EFZ)
5. Proshares Short Russell2000 (RWM)
6. Proshares UltraPro Short QQQ (SQQQ)
7. AXS Tradr Short Innovation Daily (ARKK)

1. Direxion Daily S&P 500 Bear 3X (SPXS)

• Price: $6.69
• Assets under management: $458.3 million
• Dividend yield: 6.75%
• Leverage: 3x
• Expense ratio: 1.07%
• Top 5 holdings: U.S. dollar

The benchmark S&P 500, when declining, offers ample opportunity for investors to short the stock market. The goal of buying shares of the Direxion Daily S&P Bear 3X when the S&P 500 is declining is to profit from these declines. This way, the inverse returns on SPXS trade swaps can be three times that of the S&P 500.

2. Proshares Short 20+ Year Treasury (TBF) 

• Price: $22.14
• Assets under management: $67.8 million
• Dividend yield: 4.95%
• Leverage: 1x
• Expense ratio: 0.92%
• Top 5 holdings: United States Treasury bills, 0.0% maturing on Dec. 19, 2024, U.S. dollar

When it comes to pricing, short-term Treasurys tend to be less volatile than long-term Treasurys. Proshares Short 20+ Year Treasury corresponds to the inverse of the daily performance of the Barclays Capital U.S. 20+ Year Treasury Index.

3. Proshares Short High Yield (SJB)

• Price: $16.22
• Assets under management: $96.1 million
• Dividend yield: 5.11%
• Leverage: 1x
• Expense ratio: 0.95%
• Top 5 holdings: U.S. dollar, United States Treasury bills, 0.0% maturing on Oct. 29, 2024, Nov. 21, 2024 and Feb. 28, 2025

Proshares Short High Yield is good for traders looking to benefit and profit from declines in the junk bond market. SJB corresponds to the inverse of the daily performance of the Markit iBoxx $ Liquid High Yield Index.

4. Proshares Short MSCI EAFE (EFZ)

• Price: $15.12
• Assets under management: $13.7 million
• Dividend yield: 5.52%
• Leverage: 1x
• Expense ratio: 0.95%
• Top 5 holdings: United States Treasury bills, 0.0% maturing on Dec. 26, 2024; U.S. dollar

Proshares Short MSCI EAFE is more for when international stocks are declining. It corresponds to the inverse of the daily performance of the MSCI EAFE Index, which tracks the performance of stocks in such markets as Europe and Asia. Other countries specifically weighted in this index include the following:

• Japan
• United Kingdom
• France
• Germany
• Switzerland
• Australia

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5. Proshares Short Russell2000 (RWM)

• Price: $19.08
• Assets under management: $161 million
• Dividend yield: 6.07%
• Leverage: 1x
• Expense ratio: 0.95%
• Top 5 holdings: United States Treasury bills, 0.0% maturing on Nov. 5, 2024 and Nov. 12, 2024; U.S. dollar

Approximately 2,000 companies make up the market-cap weighted index of the Russell 2000 Index, which corresponds to the inverse ETF Proshares Short Russell2000. RWM does not own shares in Russell 2000 companies but does buy swap contracts. The Russell 2000 Index is largely made up of the following sectors.

• Consumer discretionary
• Financials
• Healthcare
• Information technology
• Industrials

6. Proshares UltraPro Short QQQ (SQQQ)

• Price: $7.32
• Assets under management: $2.62 billion
• Dividend yield:12.46%
• Leverage: 3x
• Expense ratio: 0.95%
• Top 5 holdings: United States Treasury bills, 0.0% maturing on Oct. 3, 2024, Nov. 7, 2024, Nov. 5, 2024; Nov. 19, 2024 and Nov. 21, 2024

ProShares UltraPro Short QQQ corresponds to three times the inverse of the daily performance of the Nasdaq 100 Index, which tracks the biggest companies that trade on the Nasdaq stock exchange. Basically, you make short-term bets against the expectations of how the Nasdaq 100 will perform.

7. AXS Tradr 2x Short Innovation Daily ETF (SARK)

• Price: $26.31
• Assets under management: $75.7 million
• Dividend yield: 12.19%
• Leverage: 1x
• Expense ratio: 0.75%
• Top 5 holdings: U.S. dollar, derivative securities (other)

The goal of SARK is to return the inverse in a single trading session of the ARK Innovation ETF (ARKK) through swap agreements with global financial institutions. ARKK mostly invests in high-value commodities such as the following.

• Electric vehicles
• Fintech companies
• Genomics
• Internet

Should You Invest in Inverse ETFs?

Although the S&P 500 undergoes regular corrections and bear markets, when it falls in value by 10% to 20% or more, the natural tendency of the market is to go up over time, making it hard to jump into an inverse ETF without losing money. But for those with a knack for market timing, this strategy can prove valuable.

Typically only more experienced investors buy inverse ETFs and use them to leverage their positions or hedge against other positions. This is because inverse ETFs are inherently risky, and they are not suitable for long-term holders.

But if you’re an active or professional trader who fully understands the risks, an inverse ETF might be appropriate to use from time to time. Remember — no inverse ETF will ever make a list of the 10 best ETFs to hold for long-term gains, as they’re intended for short-term trading or hedging only.

With all of these caveats in mind, here’s a deeper look at what inverse ETFs are and how they operate. A variety of the best inverse ETFs follows, covering various market segments and selected for their tracking performance, size and trading volume.

What Is an Inverse ETF?

Regular and inverse ETFs both trade on an exchange, like stocks. But while a regular ETF might track the S&P 500 index and go up in value along with it, an inverse S&P 500 ETF will only go up in value when the S&P 500 falls. Inverse ETFs use derivative contracts to create positive returns when underlying stocks or indexes fall.

As these derivative investments don’t always correlate 100% in the opposite way, their returns can deviate. Over time, this deviation, known as tracking error, can magnify. This is why many experts advise not to hold on to inverse ETFs for more than a day or so.

How ETF Prices Are Calculated

To calculate the net asset value of an ETF, you take the sum of the assets in the fund, subtract any liabilities and then divide that total by the shares outstanding. Data that is calculated daily for ETFs and inverse ETFs include the following points.

• Closing assets of the fund
• Total cash in the fund that day
• What the fund is holding
• Net asset value

Final Take

Inverse ETFs can be used by aggressive traders to profit from falling markets, but they can also be used by more traditional investors who are simply looking to hedge their bets or protect their existing gains. However, generally speaking, inverse ETFs are best suited for experienced or professional investors and traders.

If you do invest in inverse ETFs, be aware that experts advise to only hold on to them for a very short period of time. Why is that? The natural tendency of the markets is to move upwards in value, and this will negatively affect the value of your inverse ETFs.

Unless you’ve got a crystal ball and can tell in advance when markets will sell off — something that even professional traders and investors don’t — the risk of inverse ETFs can often outweigh the potential reward.

Cynthia Measom, Daria Uhlig and Caitlyn Moorhead contributed to the reporting for this article.

Information is accurate as of Sept. 26, 2024, based on data from MarketBeat and Yahoo Finance. Information is subject to change.

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