The 8 Most Vilified ETFs (TVIX, GLD, UNG)
As the young upstart of the financial products universe, exchange-traded products have taken their lumps from experts, naysayers and those who just like to point fingers. Here is a mere sampling of negative events that ETFs have been blamed for and this is just in the past couple of years.
ETFs have been identified by some as Public Enemy Number One for the May 2010 flash crash. A U.S. senator has blamed ETFs for rising gas prices. We could go on, but you get the picture. ETFs get blamed for lots of things.
That means there are plenty of vilified ETFs and ETNs on the market today. Some deserve that vilification. Others do not. With no further ado, here are the eight most vilified ETFs and ETNs on the market today, in our humble opinion. In no particular order...
Just as a refresher, TVIX lost almost 30% on March 22 as traders took a bite out of the ETN due to an elevated indicative value caused by Credit Suisse (NYSE: CS) halting new share issuance. In October, TVIX traded over $109. Today it's under $8.
SPDR Gold Shares (NYSE: GLD) The SPDR Gold Shares, the largest exchange-traded product backed by physical gold and the second-largest ETP in the world, has taken its share of criticism. Some conspiracy theorists allege GLD and its competing funds actually hold no physical gold. Others that complain about rising gold prices have blamed the demand created by GLD and its brethren for the ascent in gold prices. It's almost as though GLD can't win. Well, GLD does win. It's up almost 260% since its November 2004 debut.
Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) Plenty of leveraged products could be on this list, but the Direxion Daily Financial Bear 3X Shares made its bones and garnered its less-than-nice reputation during the credit crisis. FAZ is truly one of the poster children for why leveraged ETFs cannot be used as buy-and-hold instruments. In November 2008, FAZ flirted with $800. Today it flirts with $22.
U.S. Oil Fund (NYSE: USO) Without getting into the particulars, it's fair and accurate to say that oil prices have risen since USO debuted almost exactly six years ago. So the ETF should be up, right? Wrong. USO has plunged over 43%, indicating two things. All that rolling of futures contracts kills investors' returns and because of that, USO is a miserable long-term play on rising oil prices.
Global X Uranium ETF (NYSE: URA) If not for the natural disasters that struck Japan last year, chances are the Global X Uranium ETF would not be on this list. To be fair, overt vilification of this fund has died down this year as URA has risen 11%. There's long-term potential here for the patient investor. Despite all the tough headlines the uranium industry has had to deal with, URA still has over $176 million in AUM.
Guggenheim Solar ETF (NYSE: TAN) The case for avoiding TAN and its rival, the Market Vectors Solar ETF (NYSE: KWT) has been covered again and again and plenty of times in recent weeks. TAN turned four years old on Sunday, but no one threw a party because the ETF has plunged over 90% since its debut.
iShares MSCI Spain Index Fund (NYSE: EWP) Spain's myriad economic woes have earned EWP a rightful place among our vilified ETFs. An investor that bought EWP in late 1998 and held it through today would essentially be flat. EWP has slid 57.2% in the past five years and more declines are probably on the way.
U.S. Natural Gas Fund (NYSE: UNG) As Index Universe noted, UNG does what it's supposed to do. It tracks front-month natural gas and is highly liquid. That doesn't mean this is a good ETF. It's not. UNG turned five years old on April 18. No one, except those that have shorted the fund, celebrated because the fund has plunged over 96% in that time and had to engage in two reverse splits in the past 13 months.
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