Personal finance

9 ETFs for the ‘Short’ Investor to Buy

An opposite strategy for investors.

So far, the stock market has continued its strong run. Year-to-date the S&P 500 index is up about 18% and has more than tripled from its Great Recession lows roughly a decade ago. However, some investors remain concerned the performance is not destined to last. Beyond worries about how the economy and Wall Street move in cycles, there are specific concerns, such as slowing corporate profits at home and the threat of trade wars abroad.

The good news is there are several exchange-traded products that allow investors to hedge risks or even to profit with a well-timed, tactical trade. Here are nine ETFs that go up when the market goes down.

Next:ProShares Short S&P 500 (ticker: SH) Credit

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ProShares Short S&P 500 (ticker: SH)

The most popular "short" fund, this ProShares fund is a simple inverse of the S&P 500 index of large-cap U.S. stocks. Since S&P 500 index funds are the preferred vehicle for many investors looking to play the domestic stock market, SH is not just the place for those looking to bet against the market, but also those who see the move as a form of insurance.

The thinking is that if the market keeps climbing, SH will slowly decay in value while the rest of your portfolio throws off big profits. But if things ever go south for your other positions, you will see a very nice payday here to help soften the blow.

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An opposite strategy for investors.

So far, the stock market has continued its strong run. Year-to-date the S&P 500 index is up about 18% and has more than tripled from its Great Recession lows roughly a decade ago. However, some investors remain concerned the performance is not destined to last. Beyond worries about how the economy and Wall Street move in cycles, there are specific concerns, such as slowing corporate profits at home and the threat of trade wars abroad.

The good news is there are several exchange-traded products that allow investors to hedge risks or even to profit with a well-timed, tactical trade. Here are nine ETFs that go up when the market goes down.

ProShares Short S&P 500 (ticker: SH)

The most popular "short" fund, this ProShares fund is a simple inverse of the S&P 500 index of large-cap U.S. stocks. Since S&P 500 index funds are the preferred vehicle for many investors looking to play the domestic stock market, SH is not just the place for those looking to bet against the market, but also those who see the move as a form of insurance.

The thinking is that if the market keeps climbing, SH will slowly decay in value while the rest of your portfolio throws off big profits. But if things ever go south for your other positions, you will see a very nice payday here to help soften the blow.

ProShares Short Russell 2000 (RWM)

A companion to the aforementioned short S&P 500 fund is this ProShares fund that targets small-cap stocks instead. This is a particularly interesting fund for investors who are looking to hedge a more unique portfolio of hand-picked stocks and tend to hold smaller names that may not be as easy to offset through an S&P 500 short fund.

Similarly, those who are bearish on stocks may prefer RWM to an inverse S&P fund because small caps are the first to roll over since they don't have the deep pockets or the big name recognition of major U.S. equities behind them.

iPath US Treasury Long Bond Bear Exchange Traded Note (DLBS)

Though its formal name is admittedly complex, DLBS targets popular bond investments instead of U.S. stocks. Specifically, DLBS is tied to long-dated U.S. Treasury bonds that commonly make up the backbone of any low-risk or income-oriented portfolio.

The fund is a bit pricier than the typical exchange-traded product, with 0.75% in annual expenses or $75 per year on $10,000 invested. However, investors looking to hedge their bond portfolio don't have a simple way to do so on their own – and those looking to swing-trade a decline in bonds for a quick profit have even less.

Direxion Daily Total Bond Market Bear 1X Shares (SAGG)

If you don't want to only bet against the typical long-dated government bonds, SAGG offers an inverse play on the entire bond market across maturity and including corporate bonds as well as Treasurys.

Once again, there aren't easy ways for speculators to cash in via a tactical investment like this and it's equally difficult for bond investors to find a good way to hedge. That makes SAGG a very specialized but useful tool that has a place in certain portfolios.

DB Gold Short ETN (DGZ)

Sponsored by investment giant Deutsche Bank, this exchange-traded product seeks to deliver the opposite performance of gold bullion prices.

While hands-off investors may find this a bit of a weird flavor, anyone who has played the market for long enough knows that gold is an investment that is different than anything else on Wall Street. There are short-term speculators who bank on the precious metal, as well as long-term investors looking for a hard asset that will withstand the test of time. Thanks to DGZ, both kinds of investors can also take a position on the other side of a gold trade.

ProShares Short Real Estate (REK)

Looking to yet another different asset class, REK is benchmarked to some of the biggest publicly traded real estate investments. And just as there are investors with a unique focus on gold, there are also those who spend much time on plotting the ups and downs of real estate.

There has been a particular focus in 2019 about the slowing housing market, with home prices plateauing. And since the U.S. real estate market tends to be a key indicator of broader economic trends, it's easy to see why this fund is on some investors’ radar.

Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD)

Emerging markets are an important asset class for many investors seeking growth and the biggest among these is China. That makes CHAD an important tool to hedge international risk – or, based on current headlines about an economic slowdown in the region or a trade war, an important path to profit from China's short-term decline.

Linked to so-called "A-Shares" that are mainland Chinese companies and generally limited from international investors, this Direxion fund is as pure a downside play as you can get on the region with one single and easy-to-trade investment.

AdvisorShares Ranger Equity Bear ETF (HDGE)

All of these strategies offer different benefits based on your specific portfolio holdings. But the AdvisorShares fund takes a much different approach, with a more active style that bets against individual equities based on their unique characteristics.

Though the ticker implies this is a great way to hedge, it is also a powerful way to profit from the struggles of objectively bad companies that are posting weak profits and slumping. Unlike inverse ETFs tied to a generic index like the S&P 500, at times this ETF even manages to squeak out a gain when the broader stock market is rising because of its focus on the least attractive companies.

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

Last but not least is the most aggressive of the inverse funds on this list – a three-times leveraged fund tied to the S&P 500 that seeks to deliver three times the daily returns of the popular benchmark, but in the opposite direction. In other words, if the market drops 3% this exchange-traded product is meant to rise 9%.

If you're feeling bearish, it's easy to see the appeal. Just remember the structure of this fund is complex and not designed as a long-term holding. Furthermore, it's important to know that if you bet wrong and the market actually goes up, you'll wind up losing three times as much with this short fund.

ETFs for the "short" investor to buy.

ProShares Short S&P 500 (SH)ProShares Short Russell 2000 (RWM)iPath US Treasury Long Bond Bear Exchange Traded Note (DLBS)Direxion Daily Total Bond Market Bear 1X Shares (SAGG)DB Gold Short ETN (DGZ)ProShares Short Real Estate (REK)Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD)AdvisorShares Ranger Equity Bear ETF (HDGE)Direxion Daily S&P 500 Bear 3X Shares (SPXS)1 of 12

Jeff Reeves, Contributor

A veteran journalist with extensive capital markets experience, Jeff Reeves began writing for ...  Read more

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