The Best, Worst 'Inverse' Funds for Your Portfolio

On more than one occasion this year, former Federal Reserve Chairman Alan Greenspan said he believes there is a 33% chance of a U.S. recession this year.

Even if you're a glass-is-two-thirds-full kind of person, it is clear that the U.S. economy is slowing down and may even shift into reverse.

The theory that U.S. stocks make so much money overseas that they can weather a U.S. recession does not hold water. But, never before in stock market history have there been so many funds designed to go up as equities fall.

In the good old days, if you wanted to short the 30 stocks of the Dow Jones Industrial Average, you had to open a margin account and sell each one short individually.

Then on January 14, 1998, an exchange-traded fund came along called Diamonds Trust (DIA Quote) that allowed you to sell short all 30 stocks with one trade.

On June 21, 2006, the Short Dow30 ProShares (DOG Quote) began trading. With this ETF, you don't even need a margin account to be short the Dow Industrials.

Less than one month later on July 13, 2006, UltraShort Dow30 ProShares (DXD Quote) was born.

This ETF tracks twice the inverse daily return of the Dow Jones Industrial Average and is the inverse fund that fell the most over the last month ending May 10. Open-end funds, (RYCWX Quote)Rydex Inverse Dynamic Dow Fund (RYCWX) and (UWPIX Quote)ProFunds UltraShort Dow 20 (UWPIX), use equity index swaps, futures contracts and options to implement the same double inverse target.

Top-performing Inverse Funds
Fund	Ticker	Rating	Fund Type	1 Month Total Return
ProFunds Short Precious Metals ProFund	SPPIX	U	Open-End	3.99%
ProFunds Ultra Short Japan ProFund	UKPIX	U	Open-End	2.81%
ProFunds Short Real Estate ProFund	SRPIX	U	Open-End	2.78%
UltraShort Russell2000 Value ProShares	SJH	U	ETF	0.62%
Short Russell2000 ProShares	RWM	U	ETF	0.12%
Rydex Series - Inverse Russell 2000 Fund	RYSHX	E+	Open-End	-0.09%
Profunds Short Small-Cap ProFund	SHPIX	E-	Open-End	-0.13%
ProFunds UltraShort International ProFund	UXPIX	U	Open-End	-0.32%
Direxion Developed Markets Bear 2X Fund	DXDSX	U	Open-End	-0.42%
Rydex Inverse Dynamic Russell 2000 Fund	RYIRX	U	Open-End	-0.52%
Source: Bloomberg