This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 ETFs That Have Haunted Investors All Year

Stocks in this article: VXXUUPGDXHDGESHSPY

Deep into the darkness peering, long I stood there, wondering, fearing/Doubting, dreaming dreams no mortal ever dared to dream before. -- Edgar Allan Poe, The Raven

NEW YORK ( FMD Capital Management) -- With the stock market sitting near all-time highs, oftentimes exchange-traded funds that have languished fly under the radar as investors focus on the euphoria of unrealized gains.

The natural inclination is to keep pouring new money into stocks that are performing well, which is exactly what recent data suggests has been happening. So far this year investors have added more than $277 billion into stock ETFs and mutual funds. That is the single biggest year of inflows to stock funds since 2000, which suggests that optimism is high despite the risks of a correction.

With Halloween upon us and the end of the year rapidly approaching, I thought it would be prudent to focus in on investment themes that have been persistently frightening all year long. Many of these sectors have been consistently trending downward with no bottom in sight, but when the tide turns they may be ripe for a sharp rebound.

1. What fear? The iPath S&P 500 VIX Short-Term Futures ETN (VXX) is designed to provide access to equity market volatility through CBOE Volatility Index futures. Simply put, this exchange-traded note offers investors the ability to capitalize on the CBOE VIX Index which is a widely recognized measure of fear in the marketplace. Throughout 2013 that fear has largely been replace with greed for stocks, which is why VXX has fallen precipitously.

Courtesy of StockCharts.com

This ETF is down over 60% year-to-date and most shockingly has attracted over $1 billion in new assets according to Index Universe. Clearly there is still a great deal of demand for institutional investors to hedge their bets using an easy to access ETN such as VXX in their portfolios.

While this fund has fallen out of favor now, it could quickly bounce higher if we see a flight to quality that includes heavy selling pressure from stocks. It can be used as an alternative method of shorting the market in the event that a correction ensues. However, this fund can be volatile and I recommend that novice investors thoroughly research the index methodology before entering a new position and use a tight stop loss to guard against further downside risk.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,471.17 +71.50 0.44%
S&P 500 1,923.99 +19.98 1.05%
NASDAQ 4,369.5520 +53.4780 1.24%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs