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Top Inverse ETF Pick for 2012 - Short the Financials

By Edited Nov 13, 2013 0 0

Short the Market in 2012

One great way you can make money in the stock market betting agains the market is to purchase an Inverse ETF. These are great if you think the market will collapse because they are leveraged against it. If the market drops 1 percent, for example, the ETF would go up in most cases.  These perform REALLY well if the market collapses fast like it did in 2008 - just make sure you try to sell at the peak.

Proshares Ultrashort Financials Chart

What is Proshares Ultra Short Financials (SEF)?

According to the fund summary: "The Investment seeks daily investment results, before fees and expenses, which corresond to the inverse (opposite) of the daily performance of the DOW Jones US Financial SM Index. The fund invests in derivatives that Proshare Advisors believe should have similar daily returns inverse of the index. It typically invests the rest of the assets in money market instruments. The fund is non-diversified."

So the fund invests to perform the opposite of the US Financial Index - but what exactly is IN the Dow US Financial Index?

Dow Jones U.S. Financial Services Index Fund

Top Holdings (as of Dec. 20, 2011)

Wells Fargo (12 Percent), JP Morgan Chase (11.2 percent), CitiGroup (6.83 percent), Visa (4.8), Bank of America (4.8), US Bancorp (4 percent), etc...

56 percent of the fund is invested in Banks, 43 percent in the Financial Services sector. If you think this sector will go down, buying the SEF fund would be a good bet for 2012.

Reasons to Own SEF

If you are bearish on stocks and the market in general for 2012, this could be a great bet. The debt crisis in Europe is FAR from over, and I believe the biggest story is yet to come - the US Debt Crisis! I believe that 2012 will be a bad year for the market, the debt crisis in the United States will come front and center, with threats of deflation gripping the markets. This is until the FED comes in and does something, with another Quantitative Easening or whatever they will call it.

I believe that owning this Inverse ETF is still a good idea even if you aren't so sure the above will happen. It serves as protection against another  2008 scenario. Not only will you be okay if the market crashes, you will profit handsomely.

Full Disclosure: I am long SEF.

Check out the original article on Inverse ETF's

Disclaimer: I am not a registered investment advisor or broker-dealer and this post is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. Everybody has there own situation! Therefore you are advised to discuss your specific requirements with an independent financial adviser. Thanks for reading.

SEF Chart

Proshares Ultrashort Financials Chart
Credit: Yahoo! Finance


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