Inverse ETF Investments and How to Utilize Them in Today's Market

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While many people are familiar with buying and selling stocks on the stock market, there are a few less-common approaches to investing that have great potential for making profit. One such investment is the inverse exchange-traded funds (ETFs). Inverse ETFs are when an investor uses various assets and derivatives, such as options, in order to create a profit when the underlying index declines in value. Essentially, one index will profit, when another index goes down. This makes it a great tool for bearish investors.

There are many advantages of investing in an Inverse ETF. Exchange-traded funds are easy to use, feature lower fees, and have great tax advantages. Also, if you own an account that does not allow short selling, you can purchase an Inverse ETF in order to have the same position for investing as a short ETF. Even though an Inverse ETF acts like a "short" position, you are actually purchasing the funds which means you do not need to hold a margin account as you would when making a "short" investment.

By purchasing an Inverse ETF, you can hedge your portfolio exposure if you have a downside risk in a particular index or sector. Another fantastic reason to consider this investment strategy is because your risk is limited to the purchase price of the fund. If you short sell in any other investment you could potentially have an unlimited loss. An Inverse ETF, on the other hand, provides many of the same benefits as short selling, but it only exposes the investor to the loss of the purchase price.

Utilizing Inverse ETFs to accomplish a wide range of investment goals from establishing hedges in their portfolios to speculating on a pullback of prices has become an increasingly popular investment choice among investors. When used in the correct manner, these products can be extremely powerful but should be used with caution as they can come with a number of risks for an investor who has not done the proper research. Taking a "short" position in certain asset classes is nothing new and investors have been utilizing this type of investment for years. When an investor has recognized an asset bubble in advance they have surely made some very nice profits off of short selling. Luckily the ETF industry has brought this same strategy within reach of other investors by facilitated the shorting of an entire index instead of simply individual stocks making it easier than needing to recognize asset bubbles.

For short to medium term investments, there is no doubt that Inverse ETFs will allow investors to obtain short term objectives making them an efficient means to make profits fast. If you are interested in participating in such purchases, the most important thing to do is research. Learn the ins and outs of Inverse ETFs and make sure all of your questions are answered before you make your first purchase.

If you are researching where to invest your money, consider purchasing an Inverse ETF to obtain short term objectives quickly and efficiently.

US Housing Market Shocks in 2012

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Despite a waning job market and other difficult economic factors the US housing market appears to be doing better in recent weeks than it has been in a long time. People are once again taking the plunge and have decided to purchase a home in an effort to make a sound investment. While the housing market still scares many people, the value of homes are no longer inflated and people can once again purchase property without worrying about their mortgage turning upside down. Over paying for property in the recent past caused a housing crisis that resulted in a severe drop in the value of the USD on forex. Being able to accommodate the changes that will be seen in this market should be the goal of any responsible trader, there can be no room for error where these types of indicators are concerned on Forex Charts.

It is certainly common knowledge that this and many other industries within the United States could use a boost, there is just no way that the country's economy can continue to grow in the current climate. By moving forward and encouraging an increase in the number of home sales housing lenders can really make a difference in the US economy. It is important to keep housing prices under control though, or we may see another bubble in the years ahead. There is a good chance that as the economy recovers a lot more people will buy homes, this will of course drive up the price of these pieces of property. Whether these price increases will come about again due to an "overbought" market are anyone's guess, but it seems highly likely that it will impact the USD on Forex Quotes.

The answer is not going to be regulation or oversight, but reasonable education and expectation on the part of those who purchase homes. When buying a house one needs to not overpay, not accept an ARM (adjustable rate mortgage), and not buy something they cannot afford. There is little to no doubt among many people that what is occurring could easily develop into another crisis within the next several years, and this is a really scary prospect for many people. Being able to take on the number of problems that are currently arising within the US economy is not going to be an easy task, and indeed much of it is only going to be fixed through austerity measures. Medicare, Social Security and a lot of other programs just need to go, and while it is not pleasant it needs to happen.

The author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to stay up to date with the latest forex quotes.

Q4 Market Commentary on European ETFs

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European ETFs ended a challenging 2011 with total assets of USD 259.88 bn and net new assets of USD 18.23 bn. Positive inflows in the first seven months of the year began to reverse in August. A divide opened up between physically replicated funds, with continued positive inflows, and synthetically replicated ETFs which - coming under intense regulatory scrutiny - experienced large outflows. Relatively speaking, the European ETF market weathered the storm much better than the larger UCITS industry.

Political uncertainty in Europe

Political uncertainty and the lack of a comprehensive solution to the euro sovereign debt crisis continued to impact European ETFs in Q4. After a flat October, outflows accelerated in November and December. In contrast, the US ETF market - facing similar underlying macroeconomic issues to Europe - did not experience the same crisis of confidence. Most likely due to its more mature and less fragmented status, the US ETF market, recorded a very different year to Europe, with inflows of USD 115.76 bn and only one negative month (May). The US ETF result reinforces our opinion that ETF growth will continue globally, and will gain strength in Europe when the underlying market uncertainty and regulatory scrutiny experienced here subsides.

Regulatory scrutiny intensifies

The increased regulatory scrutiny of synthetic ETFs highlighted in our Q3 market commentary continued to contribute to the outflows from these funds seen in last quarter. Since the publication of a European Securities and Markets Authority (ESMA) discussion paper in July addressing the risks of synthetic funds, a big divide has opened, with positive results for physically replicated funds and outflows mostly concentrated in synthetically replicated funds. Investors appear to prefer cash-based ETFs, placing USD 21.50 bn into physically replicated ETFs, in contrast to redemptions of USD 3.27 bn from synthetically replicated ones.

ETFs remain relatively attractive

Despite the negative flows in Q4, the European ETF market remains attractive to investors - illustrated by the USD 18.23 bn total inflows for the year - and particularly when compared to the much larger European UCITS fund industry. In contrast to the inflows recorded in European ETFs in 2011, by the end of November UCITS funds had recorded an outflow of EUR 84.5 bn. The disparity between the performance of the two investment vehicles is even more marked due to the fact that nearly 90% of European ETFs' AUM is constituted in UCITS funds.

Credit Suisse expects 2012 to be a positive year for the European ETF industry

Some headwinds remain with respect to the health of the global economy and while a solution to the Eurozone crisis remains elusive, macro tools such as ETFs should continue to hold their position as a wrapper of choice for a variety of risk/return profiles. On January 30th, the European Securities and Markets Authority (ESMA) clarified its position on ETFs, and this should allay some of the investor concern over regulatory risks that was prevalent in the market in 2011. Ultimately, we expect to see a return to the fundamentals of indexing, with both the industry and regulators taking further action in clarifying the risks of different types of exchange traded instruments.

Written by John on behalf of Credit Suisse Exchange Traded Funds