[Charles]

In case anybody wants to learn, there are inverse ETFs who’s whole purpose is to be uncorrelated with whatever market/index it’s directed against.

These are meant to hedge bleeding and are NOT meant for long term holds.

Best case they go down and you can sell at a capital loss (loss harvesting) while your primary portfolio recovers.

Worse case, it protects your portfolio against excessive losses and you can sell the shares to buy the underlying.

SQQQ – inverse Nasdaq 100
SH – inverse S&P
SDOW – inverse DOW
SRTY – inverse Russell

Again, these are meant to hedge bleeding and are NOT meant for long term holds. So you should keep a bit of an eye out of when to get in/out.

Good luck or just ride the wave. This is just a suggestion in case you feel helpless against the bleeding.

Not investment advice.

[Jesse]

Charles, I’m not trying to be a downer here. Just putting in my two cents as a professional at a fee-only investing firm with lots of experience in these areas. Forgive me if this comes off as rude.

These instruments have significant downsides, and are much more likely to be incorrectly used than any other outcome.

If you gave me a room of 100 random strangers, I would bet that 99 of them (or more likely all 100) should steer clear from attempting to navigate inverse ETFs.

You wrote the “whole purpose is to be uncorrelated with whatever market/index it’s directed against.” This is wrong.

They are NOT uncorrelated with their respective indices. That would be a correlation coefficient of zero.

They are ANTI-correlated. They have a correlation coefficient of -1.

These are two very different things, and lead to very different uses within a portfolio.

Uncorrelated assets lead to diversification.
Anti-correlated assets simply offset one another in terms of performance, minus any fees you pay.

And inverse ETFs typically have exorbitant fees.

I agree with your last piece of advice: just ride the wave.

[Ron]

Please no one invest in those inverse ETFs.
The market is down a few percent, which is normal and any downturn will be short lived over our investment lifetimes.

Since when are we worried about short term stock market performance?

The stock market will recover very quickly, as it always does, and it will very difficult to time.

Don’t bet against the market.

Just hold your VTSAX/VTI/VOO and chill, and you’ll be fine.

[Author]

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