facebookDoes buying an inverse etf give me some protection from a downside or bear market? - Seedly

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Anonymous

18 Apr 2019

Events

Does buying an inverse etf give me some protection from a downside or bear market?

In a bear market, how can you protect your portfolio?

Discussion (2)

What are your thoughts?

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It can but it'll require quite a bit of monitoring as the bull run still got some legs. Alternatively, you can hedge your portfolio using put options. Not applicable in sg market though

Hi there! Inverse ETFs are designed to increase in value when the underlying index they are tracking declines. In other words, when the underlying index rises, the fund loses money. If you anticipate a downturn in the market, buying inverse etf will hedge the risk exposure of portfolio and provide downside protection, since it works conversely to the underlying index. However, one con of holding inverse ETF is idea of compounding. For instance, the S&P500 returned 18% over the last five years whereas the inverse ETF was down 19% in the last five years.

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