When the markets are strong it is easy to  increase the monthly savings in the S&P 500 during market dips. But currently the S&P 500 is heading lower and the trend is clear.  Ever thought about “buying the dip” on the inverse S&P 500 during a falling market, such as the one we are experiencing right now?

The SPXU (ProShares UltraPro Short S&P500) corresponds to three times the inverse (-3x) of the daily performance of the S&P 500. Sounds like a good alternative right? But there is a catch: the fees and expenses.

The SPXU, like other exchange-traded funds (ETFs), has an expense ratio, which represents the annual operating expenses of the fund expressed as a percentage of its average assets under management (AUM). The expense ratio covers various costs, including management fees, administrative expenses, and other fund-related costs. Note that on the companies homepage they even warn about the daily reset: “This short ProShares ETF seeks a return that is -3x the return of its underlying benchmark (target) for a single day, as measured from one NAV calculation to the next.” But what does that really entail?

According to the SPXU prospectus “fees paid” is 0,10% and the “expense ratio” is 0,88%.The daily NAV (Net Asset Value) is computed by dividing the value of the net assets of the SPXU (i.e., the value of its total assets less total liabilities) by its total number of shares outstanding. Expenses and fees are accrued daily and taken into account for purposes of determining NAV. The NAV of each Fund is calculated by JPMorgan and is generally determined each business day as of the close of regular trading on the Exchange on which it is listed (i.e., NYSE Arca) (typically calculated as of 4:00 p.m. Eastern Time)

Once the NAV is calculated and fees are deducted, the price is adjusted and the value of your holding has likely decreased. Consequently, it only makes sense to use an investment tool such as the SPXU intra-day.