According to a Factset report, more S&P 500 companies have issued positive EPS guidance for the third quarter. Nevertheless, despite the U.S. Senate’s approval of a compromise bill, which allows for a short-term $480 billion increase in the nation’s debt ceiling and helped the country avoid a debt default, market volatility is very high owing to an inflationary environment and industrial supply chain issues.
According to a Bankrate survey, most top experts believe a stock market correction is likely next year. Moreover, last month, the ‘Rich Dad Poor Dad’ author Robert Kiyosaki said, “Giant stock market crash coming October.” Against this backdrop, we think it could be wise to invest in inverse ETFs because they profit from a decline in the value of an underlying benchmark.
So, if one agrees with Kiyosaki’s market collapse prediction, one could add inverse ETFs ProShares UltraPro Short QQQ (SQQQ), ProShares Short Dow30 (DOG), ProShares Short Russell2000 (RWM), and Direxion Daily S&P 500 Bear 1X Shares (SPDN) to one’s portfolio.
ProShares UltraPro Short QQQ (SQQQ)
SQQQ is an exchange-traded fund launched and managed by ProShare Advisors LLC. The fund invests through derivatives in companies that operate across energy, real estate, materials, industrials, health care, information technology, communication services, and utility sectors.
With $1.66 billion in AUM, SQQQ’s top holding is the U.S. Dollar, which has a 45.32% weighting in the fund, followed by United States Treasury Bills 0.0% 21-APR-2022 7.69% and the United States Treasury Bills 0.0% 14-DEC-2017 at 5.04%.
It has a 0.95% expense ratio, which is lower than the 1.4% category average. The ETF’s average four-year dividend yield stands at 2.24%. SQQQ has gained approximately 15% over the past month.
ProShares Short Dow30 (DOG)
Launched and managed by ProShare Advisors LLC, DOG employs a short strategy and uses derivatives such as futures, swaps in its portfolio. The fund invests in the growth and value stocks of large-cap companies. It seeks to track -1x the daily performance of the Dow Jones Industrial Average by using a full replication technique.
The U.S. Dollar has a 61.07% weighting in the fund as its top holding, followed by United States Treasury Bills 0.0% 28-OCT-2021 at 10.52% and the United States Treasury Bills 0.0% 21-OCT-2021 at 5.26%. The fund has $293.10 million in AUM.
Its 0.95% expense ratio compares to the 1.02% category average. Its average four-year dividend yield stands at 0.66%. The ETF has gained marginally over the past month.
ProShares Short Russell2000 (RWM)
Managed and launched by ProShare Advisors LLC, RWM invests in U.S. public equity markets. It invests in stocks of companies operating across diversified sectors through derivatives. The fund invests in the growth and value stocks of small-cap companies. It seeks to track -1x the daily performance of the Russell 2000 Index.
RWM has $281 million in AUM. Its top holdings include U.S. Dollar, with a 60.58% weighting in the fund, United States Treasury Bills 0.0% 13-JAN-2022 at 5.48%, and United States Treasury Bills 0.0% 17-MAR-2022 at 5.48%.
The fund’s 0.95% expense ratio compares favorably to the 1.02% category average. Its average four-year dividend yield stands at 0.68%. Over the past month, the fund has gained marginally.
Direxion Daily S&P 500 Bear 1X Shares (SPDN)
SQQQ was launched by Direxion Investments and managed by Rafferty Asset Management, LLC. It seeks to track -1x the daily performance of the S&P 500 Index. The fund invests in swap agreements, futures contracts, short positions, and other financial instruments. The fund’s top holdings include the U.S. Dollar with a 76.04% weighting, and Goldman Sachs Trust Financial Square Treasury Instruments Fund Institutional at 23.96%. It has $119.10 million in AUM.
Its 0.50% expense ratio compares to the 1.02% category average. Its average four-year dividend yield stands at 0.93%. The fund has gained approximately 2.5% over the past month.
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SQQQ shares were trading at $8.51 per share on Wednesday morning, down $0.12 (-1.39%). Year-to-date, SQQQ has declined -43.94%, versus a 16.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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