Inverse ETF
Categories: Index Funds
See: Exchange-Traded Fund (ETF). Then multiply by minus 1.
Regular Exchange-Traded Funds (ETFs) are stock-like trading instruments that let you bet on the performance of sectors or indexes, rather than putting money on individual companies. You think the pharmaceutical industry is going to do well in the future. But you aren't sure which particular companies are going to succeed. Buy a pharma ETF and bet on the entire sector. Or...you want to just bet on the market as a whole, rather than picking individual winners and losers. In that case, buy an ETF tied to a broad index like the S&P 500.
Inverse ETFs go the other way. Want to bet against the pharma sector? Buy an inverse ETF for the pharma sector. Think the Fed's latest decisions are going to throw the market into the tank? Put money into an inverse ETF linked to the S&P 500.
You buy that S&P 500 inverse ETF. The S&P index drops 2% the next day. That means your inverse ETF went up 2%. The next day, the S&P 500 recovers slightly, rising 1%. As a result, your investment dipped 1% for that session. The inverse ETF does the opposite of the index it's linked to.
An inverse ETF lets you take a short position, without actually going through the trouble of a short sale.
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Finance: What Are ETFs?275 Views
Finance allah shmoop shmoop what are efs Well first this
is the random financial terms you want to be asked
in the financial term spelling bee and second you should
know that e t f stands for exchange traded fund
f's are kissing cousins of index funds with one key
subtle but important difference f don't change at least generally
speaking an index fund might reflect the transportation industry and
have so much exposure to ford gm united airlines tesla
etcetera But it's required tohave say sixty five percent of
its exposure to companies based in the united states in
its charter every month that index fund has to re
balanced that exposure So if the auto companies do very
poorly in a given month index fund has to re
balance by buying mohr shares of those auto companies to
make up the difference you know given that they've performed
poorly relative toa airlines trucking company's railroads jeff howard segways
and so on But in a t f the fund
is basically set once and the shares just really kind
of float if over a decade the auto companies do
really well then in an e t f the auto
companies will just have a dominant influence on the overall
performance of the fund The management company doesn't have to
buy and sell shares regularly in an e t f
till fulfill the legal promises it agreed to at the
outset of the fund in the way in index fund
re balances its shares by buying and selling them So
what does that mean to you Well it means that
fc may drift in given directions like this guy For
example a generic technology e t f might have had
a total exposure of say five percent to internet stocks
in the beginning of nineteen ninety seven but amazon ebay
yahoo netflix and a well performed massively better than the
broader technology market which did well but just not omg
dot com well so that five percent waiting twenty years
later might be more like fifty percent or mohr of
that particular e t f but one other key aspect
of it is that it's traded like a stock i
e in one block and trade throughout the day there's
a bid and an ask price The bids are all
added up and shares in the fund can be bought
And sold at any time throughout the day Although the
market sets the price of an f just like it
does on a stock Well there now you're all ready
for the financial term spelling bee And they might also
ask you to spell lipo Yeah you might want to 00:02:33.69 --> [endTime] write that one on your arm