"Is there a bear in your portfolio?" screamed the ad with the picture of a mean-looking grizzly. It sure got my attention

Advisors Edge Magazine, by Marc Lamontagne, CFP, R.F.P., FMA
October 2008

Bear or inverse ETFs are a new breed of leveraged instruments, which move opposite to the direction of a given market or sector.

Offered in Canada by Horizons BetaPro, these bear-market versions are designed to give investors an inverse of 200% of the daily return of a particular market or sector, before fees and other expenses such as interest accrual.

So, if you held the HBP S&P/TSX 60 Bear Plus ETF on a day that the TSX 60 index was down 2%, then you'd have earned a positive 4% rate of return for that day, before fees.

This is made possible by using derivative products known as forwards. Unlike futures products, which trade on commodities exchanges south of the border, forwards are contracts that aren't traded on an organized exchange, and are not settled by an organized clearing corporation. In essence, a forward is a contractually negotiated agreement with a counterparty (usually a bank) based on delivery of return that is derived from an underlying commodity, financial instrument, or in this case a stock investment strategy.

Full text: How things work: Is there a bear in your portfolio?


Schedule an Initial Consultation

Phone: (613) 596-3353
1565 Carling Avenue, Suite 602
Ottawa, Ontario, Canada K1Z 8R1

We have been providing financial services to Ottawa Professionals, Small Business Owners and Families since 1994. Give us a call today to discuss your financial objectives. We'd love to hear from you!