Investors Turn To Exotic Investments As Buy And Hold Is Dead

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Investors Turn To Exotic Investments As Buy And Hold Is Dead

July 8th, 2009

buy-and-hold-sign Buy and hold has been a thing of the past lately. Investors have seen their 10 year returns vanish in thin air. Market volitilty and trading will be the way of the future. Investors now find themselves using ETF’s to trade with ease in the new market.

“The performance of the financial markets over the past two years has caused investors to re-evaluate their strategies. In 2008, the “buy and hold” approach to investing seemed to completely disappear. The average stock mutual fund did worse than the broad market averages. In the midst of this carnage, there is a continued interest in so-called alternative investments, many times just ordinary investment vehicles that have been re-packaged in order to sell to a broader audience. More often than not, these exotic investments contain many traps that will leave an investor with poor returns. Understanding these investments is crucial to avoid heartache and disappointment,” Owen Malcolm reports from gbj.com.

This is the reason leveraged ETF’s have gained in popularity. Malcolm reports “Ultra ETFs are funds that strive to do only one thing — move in tandem or contrary to an underlying market index by investing in financial assets with such economic characteristics as well as using leverage (debt). There are some ETFs which move double-opposite the S&P (ultra short) and some that move twice the amount the S&P moves (ultra long). For example, if the S&P decreases in value by one percent, an ultra short S&P fund strives to increase by two percent. Some ETFs go so far as to play the underlying index up or down three-fold. An ultra short can work great if the market is going down, but if the market is going up, it can have the exact opposite effect, completely wiping out other returns in the portfolio. These Ultra ETFs not only model the S&P but can also be purchased for the Russell 2000, the Dow Jones Industrial 30, Dow Jones U.S. Financials, MSCI Emerging Markets, gold, real estate and many other market segments.”

Full Story: HERE

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