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Profit From Fear With These Short ETFs

The stock market appears likely to continue its precipitous declines, and the trend may continue well into next year. With that in mind, shorting-selling, or betting against, the market has emerged as a winning strategy.

Not surprisingly, the top exchange-traded fund performers for the third quarter were inverse, or short, funds. These inverse funds gained every time the market declined -- especially in the areas of commodities and energy.

The way things are going right now, there's little to suggest there won't be more downside in these sectors and others as the world slowly but surely slips into what appears to be a severe recession.

Below are the top-performing short ETFs in the third quarter, which includes funds in the technology and utilities sectors as well. The second table provides a more complete list of inverse funds that investors may also want to look at when placing their bets going forward.

Best-Performing Short ETFs in the Third Quarter
Ticker Name 3-Month Return (%) Objective 1-Month Return (%)
SMN UltraShort Basic Materials P 85.28 Sector Fund-Undefined Equity 51.99
DTO PowerShares DB OIL 2X Short 76.5 Commodity 24.15
DEE PWR DB Commodity Double Short 70.42 Commodity 21.69
AGA PowerShares DB AGR Double Short ETN 67.93 Commodity 29.1
REC RYDEX INV 2X SP ENERGY 64.07 Sector Fund-Energy 28.17
DUG UltraShort Oil & Gas ProShares 53.61 Sector Fund-Energy 18.55
BOM PowerShares DB MTLS 2X Short 51.55 Commodity 22.55
PTD E-TRACS UBS Short PLAT ETN 48.24 Commodity 16.5
SDP UltraShort Utilities ProShares 44.81 Sector Fund-Utility 24.55
SSG UltraShort Semiconductors PR 40.6 Sector Fund-Technology 40.56

More Short Funds
Ticker Name 3-Month Return (%) Objective 1-Month Return (%)
SDK US UltraShort Russell MidCap GR 37.98 Contrarian 31.9
SZO US PowerShares DB Crude Short 34.9 Commodity 13.53
EEV US UltraShort MSCI Emerging Market 33.19 Emerging Market-Equity 8.21
DDP US PowerShares DB Commodity Short 32.83 Commodity 13.14
EWV US UltraShort MSCI JAPAN ProShares 28.94 Contrarian 11.13
ADZ US PowerShares DB Agriculture Short 27.94 Commodity 13.72
DDG US Short Oil & Gas ProShares 27.82 Sector Fund-Energy 11.08
RTW US Rydex Inverse 2X Technology 27.51 Sector Fund-Technology 31.88
TLL US UltraShort Telecom ProShares 26.43 Contrarian 26.84
SFK US UltraShort Russell 1000 Growth 25.59 Contrarian 23.51
Sam Patel, CFA, is the manager of mutual fund research for the Ratings.

In keeping with TSC's Investment Policy, employees of Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Patel cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.

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Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

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