When markets turn volatile or head south, smart investors often look for ways to hedge their portfolios or even profit from the decline. That’s where the best inverse ETFs come in. These specialized funds are designed to move in the opposite direction of a particular index or sector.
In 2025, with economic uncertainty and rate fluctuations in the headlines, inverse ETFs are gaining attention from both casual and seasoned traders.
This guide breaks down the best inverse ETFs to watch or invest in now — along with tips to help you navigate the risks and make informed decisions.
Best Inverse ETFs in 2025
Here are some top-performing or high-potential inverse ETFs to consider based on strategy, liquidity and market coverage. Here’s a list of the five best inverse ETFs for May 2025:
Why Invest in Inverse ETFs?
Inverse ETFs are designed to perform well when markets fall. They’re typically used for:
- Hedging portfolios during downturns
- Speculating on short-term market moves
- Balancing risk in highly volatile markets
- Protecting gains without selling long-term positions
These ETFs don’t require margin accounts or options experience, making them more accessible to average investors.
Inverse ETFs vs. Other Investment Options
How do inverse ETFs compare to other investments? Check out this chart that compares inverse ETFs with other investment options.
| Investment Type | Pros | Cons |
|---|---|---|
| Inverse ETFs | -Easy to buy and sell inverse ETFs –Margin account is not required -Can be used in IRAs |
-Not for a long-term investment -Daily reset risk -Low or inconsistent dividends -Fees are higher than regular ETFs |
| Put Options | -High upside with minimal cost -Leverage vast exposure with small amounts of capital |
-Complicated to understand -Time reduces value quickly -Cannot be held in all retirement accounts |
| Short Selling | -Directly profits from falling prices -No reset like ETFs |
-You will have to get a margin account -Unlimited loss potential -Not allowed in IRAs |
| Holding Cash | -No market risk -Liquidity for buying opportunities |
-No return -Misses market gains -Inflation erodes in value |
Risks of Investing in Inverse ETFs
What risks are you facing by investing in inverse ETFs?
- Not a Good Fit for Long-Term Holding: Inverse ETFs are good for short-term gains, not long-term returns.
- High Expense Ratio: Inverse ETFs generally have high expense ratios.
- Market-Timing Dependent: You have to time the market to capitalize on an inverse ETF. You must predict when the overall market will go down to receive a return on an inverse ETF.
Trends Shaping Inverse ETFs
What are some of the trends shaping inverse ETFs?
- Investors Moving Toward Inverse ETFs: Because of market uncertainty, investors are looking to invest in inverse ETFs.
- Increased Us As Short-Term Hedges: Investors look at inverse ETFs as insurance rather than a speculative buy.
- Themed Inverse ETFs Gaining Attention: Inverse ETFs in specific sectors, like AI and green energy are gaining momentum.
How to Buy Inverse ETFs
Buying inverse ETFs is not complicated. Here is a step-by-step guide on how to do so:
- Step 1: Choose a brokerage platform and fund your account – Choose a platform that allows you to buy inverse ETFs, and link a bank account.
- Step 2: Do your research – Look into different inverse ETFs. Look at daily performance, market conditions, volatility and exit plan.
- Step 3: Find the company ticker – Locate the company ticker on the platform.
- Step 4: Decide how much you want to invest – You may want to evaluate your full portfolio before investing. Talk to a financial planner if you’re unsure of whether you want to buy inverse ETFs.
- Step 5: Place an order – Choose the number of shares and amount. Then, confirm your order.
- Step 6: Track your investment – Monitor your investment in your overall portfolio and make adjustments as necessary.
Final Take to GO
The best inverse ETFs in 2025 give investors a way to hedge, protect or even profit during downturns.
While they’re not a replacement for long-term investing, they can be powerful tools when used correctly.
Thinking about getting started? Research your options, set tight guardrails, and know your time horizon.
For more help, check out our guide to ETF investing and how to manage risk in volatile markets.
FAQs
Figuring out which are the best Inverse ETFs is complicated and best suited for experienced traders. To help you learn more, here are the answers to some common questions.- What are the best inverse ETFs for beginners?
- ProShares Short S&P 500 (tracks the opposite of S&P 500), ProShares Short QQQ (tracks the opposite of Nasdaq 100) and ProShares Short Dow 30 (tracks the opposite of Dow Jones Industrial index) are the best inverse ETFs for beginners.
- Should I invest in inverse ETFs in 2025?
- If the expectation is that the market will decline, an inverse ETF may be a good buy. Inverse ETFs do well when there is market uncertainty and if you don't plan to hold on to the investment.
- Which inverse ETFs pay dividends?
- Inverse ETFs pay small dividends. ProShares Short S&P 500(SH), ProShares Short QQQ (PSQ) and ProShares Short DOW30 (DOG) are some inverse ETFs that pay dividends.
- Are inverse ETFs good for long-term growth?
- No, inverse ETFs are not good for long-term growth. They are best for short-term trades.
Information is accurate as of May 21, 2025.
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