ETF Trends
ETF Trends

Now that exchange traded funds (ETFs) have proliferated, investors have a lot of room to consider their options, one of which is short ETFs.

Most short sellers have found over the past 20 years that there is more opportunity to benefit from both long and short positions. David Fry, wealth manager and author of "Create Your Own Hedge Fund: A DIY Strategy For Private Wealth Management", for Seeking Alpha also thinks that since ETFs have expanded in scope to include major global indexes they have reduced many of the risks associated with earlier shorting techniques.

Shorting an index is less risky than shorting a stock, and although many indexes go up over the long term, there are some bear markets that can devastate traditional long-only portfolios. Protracted bear markets can last for years and it can take years for a portfolio to recover.

Shorting these days has become ever more popular, thanks to ongoing market turbulence that’s generating decent returns in these funds. In fact, a quick glance at Morningstar’s list of the top ETFs by market return is made up primarily of short funds. Evaluate shorting without emotion, exercise caution and be sure you know the risks. While ETFs have made shorting a less risky venture, there is still potential for big losses.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.