Short These Sector ETFs On Rising Rate Concerns

Since most of these funds seek to attain their goal on a daily basis, their performance could vary significantly from the inverse performance of the underlying index or benchmark, over a longer period when compared to a shorter period (such as, weeks, months or years) due to the compounding effect.

However, these funds prevent investors from losing more than their initial investment and are cheaper than direct shorting or utilization of futures contracts. Given this, investors seeking to capitalize on the rising rate scenario in a short span could consider any of the following ETFs given the bearish outlook for the sectors. Investors should note that each of the products charge 95 bps in annual fees from investors:  

ProShares UltraShort Utilities ETF (SDP - Free Report)

This fund seeks to deliver twice (2x or 200%) the inverse return of the daily performance of the Dow Jones U.S. Utilities Index. It has $7.8 million in AUM and average trading volume of nearly 5,000 shares per day. The product gained 4% last week.

ProShares Short Real Estate ETF (REK - Free Report)

This fund seeks to deliver the inverse return of the daily performance of the Dow Jones U.S. Real Estate Index. The ETF makes profits when real estate stocks decline and is suitable for hedging purposes against the fall of these stocks. The product has amassed $14 million in its asset base while volume is light at around 10,000 shares a day. REK was up 3.6% last week.

ProShares UltraShort Real Estate ETF (SRS - Free Report)

The fund offers two times inverse exposure to the performance of the Dow Jones U.S. Real Estate Index. It has managed assets worth $38.7 million and trades in moderate volume of nearly 36,000 shares. The ETF gained 7.9% last week.

Direxion Daily MSCI Real Estate Bear 3X Shares (DRV - Free Report)

This product seeks to deliver three times the inverse performance of MSCI US REIT Index. It has AUM of $16.5 million and average daily volume of around 77,000 shares. The ETF surged in double-digits last week.

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