Inverse or “bear” single-stock exchange-traded funds (ETFs) are here. They’ve actually been around in different forms for a few years. But the pace of new product launches is accelerating. Or dare I say, spiking. That creates an opportunity for investors and traders who put in the effort to understand them.
Some use leverage, and some don’t. All of them require you to think outside the box.
Investors tend to be hard-wired to focus on “what can I buy that will go up in price.” That’s even more natural when we’ve had a 16-year run in which stocks have not stayed down for long.
History is filled with periods of 5-10 years or much longer where the stock market did not make a net profit. But that history does not include any period since about 2013. That doesn’t mean it won’t happen again, only that it has not occurred in a while.
There now exists a set of about 30 ETFs which are structured to profit when a particular stock falls. They are intended to work off a single day’s performance, which means that holding them longer than a day creates some funky math.
That is not necessarily a reason to avoid these inverse single-stock ETFs. It simply means that when a stock loses 10%, it takes 11% just to get back to break-even. The more a stock goes up when we hold an inverse ETF, the more that math of investment loss works against us.
Here are three stocks ripe for bearish bets, and the ETFs that can make those bets happen. Again, be careful considering these, since a sharp rise in the stock price means sharp declines for the bear ETFs that track them. I show those in a table below the three charts.
Changing the corporate name to some allegedly cool term like “alphabet” or “meta” might have worked for others. But with the former MicroStrategy, now known simply as Strategy (MSTR), the best strategy might eventually be to try to profit from its unwinding. It is tied to the crypto business, and it has had more lives than a cat. But this one is leaning bearish to me.
Then, there’s Rigetti Computing (RGTI). For those comparing the dot-com bubble to the market in 2025 and saying “but back then there were companies selling at high valuations that made no profits…” Here’s one of those, a former penny stock turned $20 billion market cap darling. That was at its peak. From the looks of it, this one might have been ahead of its skis.