Here are the ETFs that are working during this brutal year
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Although the market has suffered a broad decline, affecting almost every sector of stock, there are still some exchange traded funds which have seen huge gains. Inverse ETFs, also known as equity trading funds, are the most successful. They bet on the wider market and are therefore a common choice. For example, ProShares has several ETFs which target various indexes. Through Wednesday’s close, the ProShares Short S & P 500 ETF (SH) is up 17% year to date, while the ProShares Short QQQ (PSQ) is up 30%. The fund in question is shorted on the Invesco QQQ Trust (a well-known ETF that focuses on large technology stocks). Leveraged versions are available. These funds have also performed well. Over 90% of the ProShares Ultra ShortQQQ QQQ ETF’s (SQQQQ) gains have been recorded in the past year. Direxion, an investment firm, also manages large inverse ETFs. These funds are more focused on specific sectors. Daily Semiconductor Bear 3x Shares has been up 47% in the past year. There is even a fund that bets directly against Cathie Wood’s Ark Innovation ETF — the Tuttle Capital Short Innovation ETF (SARK) , which has gained more than 80% in 2022. Investors should be cautious when investing in inverse ETFs. First, stock prices tend to increase over time. This makes a long-term risky bet against broad markets very dangerous. A second concern is the fact that these funds often use leverage to earn their returns. The fund can suffer a severe loss if the market experiences a sharp upward movement, like a bear market rally. Additionally, ETFs with inverted status tend to be more expensive than long-only and simpler ETFs. ETFs that trade commodities The steep rise in commodity prices this year has led to some of the most severe inflation for decades. However, those who choose to invest in such spaces get rewarded with large gains. You can bet on energy commodity prices and futures contracts with ETFs. The massive United States Oil Fund LP has risen nearly 46% in the past year. Similar results have been achieved by stock funds that focus on the energy sector. The Energy Select Sector SPDR Fund XLE (XLE), which is nearly 57% higher, has seen 44.5% growth in the First Trust Natural Gas ETF FCG (FCG). There are also leveraged funds for those who can take more risk. The ProShares Ultra Oil & Gas ETF (DIG) has doubled this year. However, they come with the same risks and uncertainties as those mentioned above. Other funds have also outperformed. For example, in the agricultural space, the Teucrium Wheat Fund is expected to rise more than 62% by 2022. Protective funds The funds designed to safeguard portfolios are doing their job, even though they did not produce double-digit returns. For example, the SPDR SSGA U.S. Large Cap Low Volatility Index ETF has seen a 11% drop in returns over the past year. While that decline is certainly painful for investors, it is also significantly better than the S & P 500. A few more dividend-oriented funds are seeing success. The Invesco S & P 500 High Dividend Low Volatility ETF (SPHD) is up more than 2% for the year. Last but not least, the oldest investment in defensive investing, gold, is holding its own. The SPDR Gold Shares ETF, (GLD), is now down by less than 1 percent for the year.
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