5 Best Inverse ETFs Of March With More Upside Potential

The month of March was brutal for the U.S. stock market with both the Dow Jones and S&P 500 registering their worst month since October 2008. Meanwhile, the Nasdaq Composite index logged in its worst month since November 2008.

The steep decline can be attributed to the spread of the deadly coronavirus, which is showing no signs of slowdown. The number of cases has been increasing day by day in the United States, which is now leading the other nations with more than 185,000 confirmed infections (about 20% of the global tally) and nearly 4,000 deaths, per the latest data.

President Donald Trump has warned America to brace for a “very, very painful two weeks” as the White House projected that the coronavirus pandemic could claim 100,000 to 240,000 lives, even if current social distancing guidelines are maintained. United Nations stated that the outbreak is the “most challenging crisis we have faced” since World War II.

Given this, the bearish trend is likely to persist in the weeks ahead that will continue to raise the appeal for inverse or inverse leveraged ETFs. These products either create a short position or a leveraged short position in the underlying index through the use of swaps, options, future contracts, and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period of time, provided the trend remains a friend.

However, these funds run the risk of huge losses compared with traditional ones in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of the underlying index over the longer period compared to a shorter period (such as weeks or months).

We have highlighted five best-leveraged inverse ETFs of March from different corners of the stock market that have piled up more than 20% gains, though these involve a great deal of risk when compared to traditional products. This uptrend might continue, at least for the near term, if sentiments remain the same.

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