Bet Against the S&P 500 with This Fund

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 Short S&P500 (NYSEARCA:SH) provides inverse exposure to a market cap-weighted index of 500 large- and mid-cap U.S. firms selected by the S&P Index Committee.

SH offers a bet against the S&P 500 and provides the liquidity required to allow investors to use it as such. The fund, like most leveraged and inverse products, is designed to deliver its inverse exposure to its underlying index — a market cap-weighted basket of 500 large-cap U.S. firms selected by the S&P Index Committee.

Holding this fund for a period longer than a day will introduce the effects of compounding, even if this is less pronounced in a non-leveraged product. Still, the tool is designed to be held for the short term (days or weeks) with frequent rebalancing of exposure to approximate the target -1x multiple.

This fund is not a buy-and-hold investment and should not be expected to provide index leverage return greater than a one-day period.

Source: www.stockcharts.com

The fund invests in financial instruments that ProShares Advisors believes, in combination, should produce daily returns consistent with the fund’s investment objective. It is a float-adjusted, market capitalization-weighted index of 500 U.S. operating companies and real estate investment trusts selected through a process that factors in criteria such as liquidity, price, market capitalization, financial viability and public float. The fund is non-diversified.

SH has $3.8 billion in assets under management and a 0.07% average spread. Its expense ratio is 0.88%, meaning it is relatively expensive to hold in relation to other exchange-traded funds.

While this fund provides investors with inverse exposure to the S&P 500, this kind of ETF may not be appropriate for all portfolios, hence interested investors should always conduct their own due diligence in deciding whether the fund is suitable for their own individual investing goals.

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.

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