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'Inverse' Funds Surged in October

With the S&P 500 losing 16.8%, the Nasdaq 100 down 16.3% and the Dow Jones Industrial Average off 13.9% in October, all 10 of the best-performing exchange-traded funds in October were inverse funds.

The top ETFs with their one-month total returns for last month were:

PowerShares DB Crude Oil Double Short ETN (DTO) at 66.6%, PowerShares DB Base Metals Double Short ETN (BOM) with 53.5%, PowerShares DB Commodity Double Short ETN (DEE) at 51.4%, ProShares UltraShort Real Estate (SRS) with 50%, ProShares UltraShort Russell2000 Growth (SKK) at 41.2%, ProShares UltraShort Russell MidCap Growth (SDK) with 38.2%, Rydex Inverse 2x S&P MidCap 400 ETF (RMS) at 37.4%, ProShares UltraShort Industrials (SIJ) with 36.7%, ProShares UltraShort MidCap400 (MZZ) at 36.5%, and Rydex Inverse 2x Russell 2000 ETF (RRZ) with 36.4%.

Five of the funds have been trading for at least a year, the minimum duration necessary to qualify for a rating by our risk-adjusted return ranking system. The ProShares UltraShort Real Estate ETF returned 33% over the past year, earning a C- rating. At 84.2% for the same period, the ProShares UltraShort MidCap400 ranked on the high side of average at C+.

ProShares UltraShort Russell2000 Growth scored a rating of A, returning 92% for the year ending Oct. 31. This excellent performance was trumped by the 106.6% gain from ProShares UltraShort Industrials and 124.1% increase from ProShares UltraShort Russell MidCap Growth. Both of those ETFs topped out with A+ ratings.

Source: Ratings.

Read this for an explanation of our ratings.

Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

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