Don’t you just love all the new ETFs that are coming to market?
I certainly do, and based on their popularity, I think Wall Street is finally getting the message when it comes to what investors really want.
And what do we really want? We want low transaction costs, objective management, ease of trade — and we want to know exactly what we are getting with our investment dollars. That’s what ETFs offer, and although it’s taken a few years, that’s in fact what Wall Street is giving us.
Case in point is the eight new ETF offerings that began trading today on the American Stock Exchange. The company putting these new ETFs out to the market is ProShares, a division of ProFunds — a great company that I like, and whose mutual funds I recommend in my subscription services.
The big news with these ProShares offerings is that now you can purchase not one, but four different bear market ETFs. These bear ETFs are designed to move in the opposite direction of their respective indices. For example, the ProShares Short S&P 500 (SH) is designed to move higher when the S&P 500 falls. That means if the S&P 500 index loses 2%, then SH will gain 2%.
It’s the same principle for the other three bear fund offerings from ProShares. These funds also provide short exposure to various segments of the stock market. All of the bear funds seek daily investment results that correspond to the inverse of those indexes, before fees and expenses (see below for complete list of ETFs).
In addition to the four bear offerings, ProShares has come out with four funds that take advantage of leverage. They are called the "Ultra" ProShares, and they are the first ETFs designed to magnify daily index performance. These funds seek daily investment results that correspond to twice the performance of their underlying indexes, before fees and expenses.
In the case of the ProShares Ultra S&P 500 (SH), if the S&P 500 index rises 2% then SH will rise 4%. Those kinds of hyper-gains are what Ultra funds are all about, and when conditions in the market permit these leveraged bets, they can be a really nice way to pump up your portfolio’s overall performance.
"We look at ProShares as the start of a whole new chapter in the development of ETFs," said Michael Sapir, CEO of ProShare Advisors LLC, part of ProFunds Group, in an announcement that accompanied today’s premiere of these eight new ETFs.
"By providing built-in short and magnified exposure to the indexes, ProShares make it much easier to execute a number of powerful strategies. In times like these, when the markets haven’t necessarily offered a lot of help, we’ve seen investors interested in pursuing more sophisticated strategies — for example, hedging to manage risk. Now, to execute that strategy, they no longer have to go through the process of setting up margin accounts or covering margin calls — they can simply trade ProShares."
I completely agree with Mr. Sapir, and I don’t think it will take much time before I begin using some of these new ProShares ETFs in my own portfolio.
ProShares Short Fund Offerings:
Short QQQ—Inverse of the Nasdaq-100—(PSQ)
Short S&P500—Inverse of the S&P 500—(SH)
Short MidCap400—Inverse of the S&P MidCap 400—(MYY)
Short Dow 30—Inverse of the Dow Jones Industrial Average—(DOG)
ProShares Leveraged Offerings:
Ultra QQQ—Double the Nasdaq-100 Index—(QLD)
Ultra S&P500—Double the S&P 500 Index—(SSO)
Ultra MidCap400—Double the S&P MidCap 400—(MVV)
Ultra Dow30—Double the Dow Jones Industrial Ave—(DDM)