SQQQ up 16.84%! Here's how inverse ETFs help reduce risk in a volatile market!

The S&P 500, Dow Jones and Nasdaq 100 fell 0.90%, 0.5% and 1.5% respectively on Monday due to soaring inflation, the Fed's rate hikes and the gloomy economic outlook. However, the inverse ETF SQQQ bucked the market and rose 16.84% in the last 5 trading days, highlighting the benefits of inverse ETFs.

How to reduce risk in a volatile market? Making a well-diversified investment portfolio and layouting some inverse ETFs and ETFs may be a good option.

Inverse ETFs seek inverse investment results (-1X, -2X, or even -3X) of the daily performance of the underlying index. Taking a leveraged inverse ETF ProShares UltraPro Short QQQ (SQQQ.US) as an example, if the NASDAQ Index falls 1%, SQQQ will increaseby3%. During the recent decline in the Nasdaq, SQQQ has gained 16.84% in the last 5 trading days.

In addition, leveraged ETFs may be an option for greater returns when the U.S. stock index signals that a short-term uptrend is apparent to you.

If you think of each ETF as a basket, then an investor buying one ETF is equivalent to buying the entire basket of stocks at one lower cost. With the prices of some ETFs that track important indices having dropped significantly, now may be a good time to get in on the star stocks of U.S. stocks at a low price.