Protection against the downside has a price when the market is doing well. Although this price is reasonably predictable with VIXH, it is not so with PHDG because of the more dynamic allocation strategy.
One fundamental cornerstone of investing is to keep it simple. Over the course of the next stock market cycle, PHDG could certainly do exactly what PowerShares hopes by avoiding a large decline, but the fund is not simple.
It will be difficult for many investors to fully understand, including financial advisers who need to explain the products they have chosen for their clients, and this could make it difficult for the fund to attract assets.
At the time of publication, Nusbaum had no positions in securities mentioned.Follow @randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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