Monday, March 16, 2009

Leveraged ETF Performance

Below we highlight the year to date performance of the many leveraged and inverse ETFs available to US investors. But first we want to highlight the 3x ETFs to show their year to date performance versus the indices they follow. Remember, these ETFs are meant to track the DAILY performance of the underlying indices, but many investors unfortunately hold them as long-term investments, where the performance can be way off. As shown below, the 3x long large cap ETF (BGU) is down 41.55% year to date while the index it tracks is down 13.99%. This is right inline with where performance should be. However, the 3x inverse large cap ETF (BGZ) is up just 26.78%. Investors hoping for 3x have only gotten 2x in this case. The same holds true for the 3x inverse small cap (TZA), which is up 41.57% versus the underlying index's decline of 20%.

Where performance gets really bad is in the 3x inverse financial ETF (FAZ). While the underlying financial sector is down 28.15% year to date, the 3x inverse ETF is up just 0.34%! Investors who wanted to bet big against the financials this year using FAZ have been correct in their prediction but haven't made a dime on it (well maybe a dime).


Below we highlight the 25 best and worst performing leveraged and inverse ETFs year to date.

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Lunch is for wimps

Lunch is for wimps
It's not a question of enough, pal. It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another.