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 TheStreet.com Ratings.

In keeping with TSC's Investment Policy, employees of TheStreet.com 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.

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