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5 Inverse ETFs That Have More Than Doubled This Year

The year 2022 has been brutal for the stock market, with the major indices slipping into a bear market (a drop of 20% or more from a recent high). Russia’s invasion of Ukraine, surging consumer prices, aggressive rate hikes by the Fed, and global growth concerns have roiled the stock market badly.

This has resulted in huge demand for inverse or inverse-leveraged ETFs as these fetch outsized returns on bearish sentiments in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged equity ETFs that have more than doubled so far this year. These include Daily Dow Jones Internet Bear 3X Shares WEBS, MicroSectors FANG & Innovation -3x Inverse Leveraged ETN BERZ, MicroSectors U.S. Big Oil Index 3X Leveraged ETN NRGU, Direxion Daily MSCI Real Estate Bear 3X Shares DRV, and ETFMG 2x Daily Inverse Alternative Harvest ETF MJIN and will remain investors’ darlings, provided the sentiments remain bullish.

The Federal Reserve has been on an aggressive tightening policy to fight skyrocketing inflation, which is near its highest levels since the early 1980s. In its fight, Fed Chair Jerome Powell raised interest rates by 75 bps for the fourth consecutive time that pushed the benchmark rate to 3.0-3.25%, the highest level since 2008. The rapid tightening has sparked worries over recession, leading to a sell-off in the stock markets (read: Guide to Interest Rates Hike and ETFs).

Additionally, Russia’s invasion of Ukraine has resulted in supply-chain issues while most of the developed and developing economies are witnessing a slowdown. Bouts of weak economic data across the globe added to the global slowdown fears. U.S. mortgage rates topped 6.5% for the first time since mid-2008, signaling that the hot housing market is cooling rapidly. Meanwhile, economic activity in China, the world's second-largest economy, has been declining and the property sector is also suffering. Eurozone inflation for August also rose to another record high.

Leveraged and Inverse-Leveraged ETFs

Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend.

However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).

Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear (see: all the Inverse Equity ETFs here).

Daily Dow Jones Internet Bear 3X Shares (WEBS) – Up 146.5%

Daily Dow Jones Internet Bear 3X Shares provides three times inverse play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index.

Daily Dow Jones Internet Bear 3X Shares has attracted $61.6 million in its asset base and charges 95 bps in annual fees. The ETF sees an average daily volume of about 558,000 shares.

MicroSectors FANG & Innovation -3x Inverse Leveraged ETN (BERZ) – Up 137.7%

MicroSectors FANG & Innovation -3x Inverse Leveraged ETN is linked to the three times leveraged inverse performance of the Solactive FANG Innovation Index. The index tracks the stock prices of 15 large-capitalization, highly liquid U.S. technology stocks.

With AUM of $20.5 million, MicroSectors FANG & Innovation -3x Inverse Leveraged ETN has an expense ratio of 0.95% and trades in an average daily volume of 260,000 shares.

MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU) – Up 116.9%

MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies.

MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $1.1 billion in its asset base, while trading in an average daily volume of 163,000 shares. The expense ratio comes in at 0.95%.

Direxion Daily MSCI Real Estate Bear 3X Shares (DRV) – Up 115.9%

Direxion Daily MSCI Real Estate Bear 3X Shares seeks to deliver three times the inverse performance of MSCI US REIT Index. It has AUM of $202.8 million and an average daily volume of around 468,000 shares (read: 5 Best Inverse-Leveraged ETFs of September).

Direxion Daily MSCI Real Estate Bear 3X Shares charges 95 bps in fees per year.

ETFMG 2x Daily Inverse Alternative Harvest ETF (MJIN) – Up 111.8%

ETFMG 2x Daily Inverse Alternative Harvest ETF provides leveraged inverse exposure to companies within the cannabis ecosystem bene???tting from global medicinal and recreational cannabis legalization initiatives. It measures the two times opposite performance of the return of the Prime Alternative Harvest Index.

ETFMG 2x Daily Inverse Alternative Harvest ETF has amassed $1.4 million and trades in average daily volume of 24,000 shares. It charges 95 bps in fees per year.


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Direxion Daily Real Estate Bear 3X Shares (DRV): ETF Research Reports
 
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU): ETF Research Reports
 
Direxion Daily Dow Jones Internet Bear 3X Shares (WEBS): ETF Research Reports
 
MicroSectors FANG & Innovation 3X Inverse Leveraged ETN (BERZ): ETF Research Reports
 
ETFMG 2X Daily Inverse Alternative Harvest ETF (MJIN): ETF Research Reports
 
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