Inverse Fund Aims to Rise Double the Amount Stocks Fall

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The ProShares UltraShort S&P500 (NYSE: SDS) is an inverse exchange-traded fund (ETF) that seeks daily investment results that correspond to two times the inverse (-2x) of the daily performance of the S&P 500.

It is worth pointing out that this fund, like most leveraged and inverse ETFs, is designed to provide a positive return at a time when the S&P 500 is falling. However, SDS, and inverse ETFs in general, do their best work when they are held for a limited time.

Holding on to shares of SDS for more than a short time is not recommended as it is often difficult to determine how long a downturn will last. Thus, it is easy to expose oneself to unnecessary risk by confusing a temporary aberration and the beginning of a bear market.

Furthermore, failing to regularly rebalance SDS shares, especially at a time of heavy market volatility, has the possibility of exposing investors to performance drift from the S&P 500 index. This means that it is possible for the value of the shares to fall even as the market moves in a desirable direction.

The fund currently has more than $1.04 billion in assets under management and an average spread of 0.03%. It also has an expense ratio of 0.90%, meaning that it is more costly to hold than some other ETFs.

According to, this fund’s performance has been negative in both the short and long run. As of September 10, 2019, SDS is down 4.83% over the past month, down 7.20% over the past three months and down 30.62% year to date. This is not a surprise given the S&P 500 yielded positive returns during each of those time periods.

Chart Courtesy of

In short, while SDS does provide an investor with the ability to profit at a time when the S&P 500 is yielding negative returns, inverse ETFs may not be appropriate for all portfolios. Thus, interested investors always should do their due diligence and decide whether the fund is suitable for their investing goals.

Since SDS is double leveraged, investors need to be especially wary about owning its shares. An upturn in the S&P 500 would likely lead to double the losses incurred by this inverse fund. However, when the S&P 500 is tanking, this double inverse fund would be a way to seek twice the profits of the decline in the index.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

share on:

Like This Article?
Now Get Jim's FREE Special Report:
The Top 11 Dividend ETFs to
Buy Right Now

Get up to 5X the yields of traditional income plays.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader

Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor