Tesla (NASDAQ:TSLA) stock has been struggling over the past year. Investors have been shedding growth stocks amid fears of a slowdown in the economy and even a possible recession. Inflation and economic headwinds could very well impact demand for Tesla's high-priced vehicles. And while the stock has been rising this year, over the past 12 months, shares of Tesla are down around 50%.
Betting against the stock surely should have paid off – right?
If you shorted Tesla's stock you could be sitting on a great profit. But if you didn't want to actually short the stock yourself and instead decided to invest in a single-stock exchange-traded fund (ETF) such as the AXS TSLA Bear Daily ETF (NASDAQ:TSLQ), however, you might be surprised with the results. The fund doesn't achieve the same results as shorting a stock as it is a leveraged ETF and it is only intended for short-term traders as its aim is to achieve the inverse of the stock's daily performance.
The ETF launched in July of 2022 and since then it has risen by just 6% while shares of Tesla have declined by 30%. Entering 2023, the fund was up over 50% but the automotive stock's rally this year has significantly chipped away at those gains. The extreme volatility in the fund combined with its high net expense ratio of 1.15% hasn't made this a great option for investors as even with a significant drop in Tesla's value, you wouldn't be a whole lot better off holding this ETF. It's an important reminder that it is designed only for short-term traders and isn't suitable as a long-term option.
