The traditional advantages of investing with exchange-traded funds (ETFs) are that they provide transparency, flexibility and cost effectiveness. But an additional implicit benefit is the chance to gain exposure to investment vehicles or strategies which are out of your reach as an individual, either because you lack the required capital or because the strategy is mostly available to professionals.
ETFs offer the chance to invest in a range of alternative investments other than traditional stocks and bonds, yet with the simplicity of buying and the transparency of pricing that is available in the stock market. One ETF company which specializes in alternative ETFs is ProShares.
Founded in 2006, ProShares now offers more than 140 alternative investment ETFs, the largest alternative investment ETF lineup in the United States. ProShares is especially well known for its funds that provide magnified exposure (2x or 3x the daily earnings) to an index or inverse earnings of an index.
For instance, those who began the year betting against the S&P 500 by investing in the UltraPro Short S&P500 (SPXU) ETF temporarily saw their contrarian bet pay off big, as it jumped 10% by the end of January. However, the volatile nature of triple-inverse investing becomes obvious when you see that, as of today, the ETF has a year-to-date loss of 0.71%. Last year, when the S&P 500 gained more than 30%, SPXU was down 60.04% for the year.
Alternative investing can be attractive to those seeking maximum diversity in their portfolios, and using alternative investments from ProShares allows you to do so in a variety of ways, and with a variety of funds. However, if you use alternative investments, I recommend that you do extra research to be clear about how much risk you are accepting.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.
In case you missed them, I encourage you to read my articles from previous weeks on Eagle Daily Investor about ETF providers Vanguard, iShares and State Street. I also invite you to share your thoughts below.
Best, Doug Fabian
Doug Fabian has continued to uphold the reputation of the Successful Investing newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest.
Are YOU Using the Plan that has Beaten the Dow by 240%?
If you’re like most investors, your goal is to make enough money to live comfortably and retire wealthy. But also, like most investors, you’re probably plunking your money into the big indexes that mirror the market. The key to achieving your financial goals is not to keep up with the market, but radically and consistently outperform it for years on end.
That’s where this 35-year-old Dow-crushing strategy comes into play. Since the plan’s inception, it has beaten the market by more than 240%, regardless of market conditions. Click here now for the essential “tool kit” that will help you put this plan to work.