Inverse ETFsd

Using TZA, SDS, and other inverse ETFs can help soften a market downturn. These ETFs go against an index, one or multiple times. So, SDS goes against SPY, the SP500, doublBut these ETFs can be treacherous.  In fact there is a warning when you buy them. They are not for the faint-hearted.  And they don't reset exactly at the beginning of the trading day nor do they precisely maintain their value over time, tending to slightly drift downward. TZA goes against the Russell 2000, the small-cap index fund. 

Triple and double inverse ETFs should be traded with care--like handling Drano or vitriol. If small caps go down, say 1%, TZA will go down 3, 4, or 5 percent. On days, I have seen it drop 10%. What comes to mind is one very unpleasant day in 2009 when the market seemed to rise in what I thought was a bear rally, but turned out to be an actual full-fledged rally, the beginning of a thirteen-year rally. Obviously, using stops and limits is necessary. And I gained respect that day for Koehneman's loss aversion theory.  Losses hurt more than gains, and whatever happiness collecting profits on the downshifting market were lost that single day. 

In our current situation, inverses such as TZA or SDS can provide a hedge, and given the likelihood that the market will continue to dip, even if there is a bear rally, one can just buy them, and if they lose for the day, hold on to them.  Presumably when the markets drop further during what seems an inevitable upcoming recession, they can be liquidate. But, given the danger of these instruments to the  novice trader, don't say you heard it hear. And you never really know what the market will do.

DL