Inverse exchange-traded funds are exchange-traded funds which are traded on the public stock market. This type of ETF is aimed to perform the inverse of whatever index being tracked. These funds work through the use of leveraged investment tips such as futures contracts, short selling, and trading derivatives.

Inverse ETFs give a similar result to short selling the stock in the index, setting aside the impact of fees and other costs and providing over a short period of time results opposite of their benchmark. During bear markets these are very popular, since they are designed to rise in a falling market. For example, an inverse S&P ETF would try and move opposite of that of the S&P. If the S&P falls by 1% the invest ETF is designed to move up 1%.

Unlimited losses can occur to an investor’s stock portfolio through a short sale whether an ordinary share of stock or an ETF. Investors only lose the purchase price with an inverse ETF but retain all other advantages of a short sale. Unlike a short sale, inverse ETFs can be held in an IRA account.

Investors can benefit from several different long-term scenarios from inverse ETFs. When trapped in a bear market, investors can reduce losses by using an inverse ETF. Another strategy is if a long-term investor has a large gain and doesn’t want to pay high taxes they would invest in this fund.

Long-term investors can also avoid paying taxes if they realize a large paper gain by investing in these funds. When investors use inverse ETF strategies they must change their notional daily. Normally, this causes more trading. Some experts have said this has increased volatility, many other experts disagree and say it has no impact.

Inverse ETFs typically have higher costs than that of standard ETFs. Most of these funds are actively managed, which means higher broker commissions. If not closely monitored, costs can get out of control and eat away at gains.

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Gold Exchange Traded Funds (GETFs) track the price of gold. All major stock exchanges including Paris, New York, Zurich, Mumbai, and London trade GETF’s. Gold ETFs held 1,750 tons of gold as of October 2009.

Another fund which aims to track the price of gold is a closed-end fund (CEFs) and also exchange traded notes (ETN’s). Each gold fund whether it be a CEF, ETN or an ETF has a different structure which is found summarized in their prospectus. These different funds may not physically hold gold. Gold ETN’s for example, traditionally track the price of gold through the use of derivatives.

Benchmark Asset Management Company Private Ltd in India first brought to life the idea of a Gold ETF when filing a proposal with the Securities and Exchange Board of India (SEBI) in May 2002. It took until March 2007 to receive all approvals and formally launch. The Australian Stock Exchange actually beat Benchmark when it launched its fund in March 2003 under Gold Bullion Securities.

Fees for GETFs are very minimal, along with a small storage fee brokers charge no more than 0.4%. Only a fraction of that is charge by brokers in the U.S. Annual costs associated with gold such as storage, selling, management, and insurance are charged by selling a small portion of the gold in a particular portfolio.

Gold ETFs, in many countries, are a way to get out of paying sales tax or the VAT which applies to the actually, physical gold coins and bars. As for the U.S., Gold ETF’s are treated as a commodity. Rather than being the 15% long-term capital gains rate for non-collectibles, gold is taxed at 28% because it’s a commodity.

Gold Exchange Traded Funds are officially sponsored by the World Gold Council. Establish by the world’s leading gold mining companies in 1987, its purpose is to create worldwide demand for gold. The World Gold Council was established in 1987.

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