As a new month approaches, I think it is just as important to think about what not to buy as it is to find new opportunities. Markets don't move in straight lines, and some exchange-traded funds (ETFs) that make sense in one environment can quietly work against you in another.
These are two ASX ETFs I would personally avoid buying in February, based on how I see 2026 shaping up.
BetaShares Australian Equities Bear Hedge Fund (ASX: BEAR)
The BetaShares Australian Equities Bear Hedge Fund is designed to move in the opposite direction to the Australian share market on a day-to-day basis. If the S&P/ASX 200 Index (ASX: XJO) falls, the BEAR ETF should rise. If the market goes up, this fund should fall.
That structure makes sense as a short-term hedge during periods of heightened volatility or when investors are genuinely worried about a sharp market drawdown. But it is exactly why I would avoid it if you have a constructive view on equities.
Personally, I think the Australian share market could deliver something close to a 10% return in 2026. If that happens, the BEAR ETF is effectively positioned to lose money over time. Even modest but consistent market gains can be painful for inverse ETFs, especially when held beyond very short windows.
For me, the BetaShares Australian Equities Bear Hedge Fund is a tactical tool, not a long-term investment. If you believe the market's next meaningful move is higher, owning an ETF that is structurally betting against that outcome just does not make sense.
VanEck Australian Banks ETF (ASX: MVB)
I am generally supportive of parts of the Australian banking sector. In fact, I am a shareholder in Commonwealth Bank of Australia (ASX: CBA) and still view it as one of the highest-quality businesses on the ASX.
The issue with the VanEck Australian Banks ETF is concentration. The ETF gives you broad exposure across the major banks, and that is where I see the problem emerging.
While CBA continues to execute well, I am less convinced the same can be said for all of its peers heading into 2026. Margin pressure, slower credit growth, and higher capital requirements could weigh on earnings for some other banks, naturally restricting returns for the ETF as a whole.
Rather than owning the entire sector through the MVB ETF, I think investors may be better served by being selective or allocating capital to areas of the market with clearer growth or income tailwinds.
Foolish Takeaway
Neither of these ETFs is bad in isolation. They simply feel mismatched to the current environment and my outlook for the year ahead.
With markets showing signs of resilience and selective opportunities emerging elsewhere, I think February could be a better time to focus on funds positioned to benefit from growth, rather than betting against the market or tying returns to parts of the banking sector that may struggle to keep up.
