In bear markets, there are several ways of making money, but most are speculative. Examples include shorting stocks (where your potential for loss is unlimited) and buying puts (which are very volatile and have expiration dates). However, there is a less risky way of playing the market on the short side, and that is through the use of bearish exchange traded funds also known as ETFs.
An example is ProShares Short Dow30 (DOG), an ETF which invests in derivatives with a goal of the inverse of the daily performance of the Dow Jones Industrial Average Index. This ETF was up 1.6% during the last month, versus the Trading-Inverse Equity category which was down 7.48% and the S&P 500 was down 1.13%.
If you are negative on NASDAQ stocks, you may want to consider the ProShares Short QQQ (PSQ) ETF, which has a goal of attempting to achieve the opposite of the daily performance of the NASDAQ-100 Index. The ETF is up 0.98 for the last month.
For investors who think that small cap stocks are in for a continuing downturn, the ProShares Short SmallCap600 (SBB) is an option. This ETF attempts to achieve the inverse of the daily performance of the S&P SmallCap 600 Index. The ETF was up 1.12% for the latest month.
Some investors that are bearish and want some real action have the option of using leveraged bearish ETFs. These ETFs can provide twice or three times the the return of an unleveraged ETF. The Direxion Daily Financial Bear 3X Shares (FAZ) has a goal of achieving 300% of the inverse of price performance of the Russell 1000 Financial Services Index. The ETF had an increase of 7.06% for the last month.
One issue to be aware of when investing in these ETFs is that over long periods of time, they may not even come close to matching the inverse of of the index. These ETFs are generally designed to achieve their goals on a day by day basis.