2017 was a good year for investors as the S&P 500 increased 19.42%, but unfortunately, not all investors saw their investments grow in value during the year. Investors who had purchased some different Exchange Traded Funds saw their investments nearly disappear during what will be referred to as an “up” year for investors and the stock market.
What is not surprising though is that seven of the nine most prominent ETF losers of 2017 had something to do with investing in the Volatility Index. The worst performer was the ProShares Ultra VIX Short-Term Futures ETF (UVXY), falling 93.96%. This fund provides 2X exposure to short-term, first and second month, VIX futures. The UVXY is a fund essentially will offer investors a way to make money if the VIX itself increases. Furthermore, because this fund is leveraged 2X, if the VIX increases by 10%, UVXY investors will make 20%. But, due to the fund's exposure, it has high carrying costs, meaning investors who hold the fund for more than one day will lose money due to those roll costs.
Therefore, the UVXY needs both the market to be volatile regularly for investors to make any money, even over a small period of time. In 2018 its unlikely UVXY will lose as much as it did in 2017 because the end of 2016 was highly volatile following the election of President Trump. Continue reading "Did You Own Any Of The Worst ETF's of 2017"