why are inverse etfs only intended for short holding periods 
since they rebalance daily inverse etfs often diverge from the actual inverse performance over longer periods they also compound losses in volatile upward trending markets indeed inverse etfs tend to decline in value over time regardless of whether the underlying market is rising or falling because of this inverse etfs are complex products meant for active traders not long term buy and hold investments the bottom lineinverse etfs are designed to move in the opposite direction of a benchmark index on a daily basis they use derivatives like futures and options to short the underlying index in order to provide the inverse exposure investors may use inverse etfs to profit from or hedge against market declines in specific sectors or indexes however inverse etfs are complex instruments primarily intended for active traders not long term investors they reset daily and can diverge from true inverse performance over longer holding periods inverse etfs also compound losses in volatile upward trending markets posing significant risks if the market turns against you due to these risks and complexities inverse etfs are not appropriate for the average retail investor 