NEW YORK (FMD Capital Management) --This time of year is all about looking over your portfolio and beginning to position your assets for success in 2014. You should be actively screening your holdings for both winners and losers to determine what changes to make before the end of the year.
I always recommend looking over your losing positions and re-evaluate your thesis for owning them. If there is no longer a sound fundamental or technical reason to hang onto a stock, exchange-traded fund or mutual fund, you should consider selling it and looking for new opportunities. This is especially true for taxable accounts where year-end tax loss selling can be of benefit to help offset capital gains.
With that in mind, I was perusing the list of the 100 worst ETFs according to year-to-date returns published by ETFDB.com this week and found some interesting statistics. Not surprisingly, the top of the list is dominated by ultra-short funds, commodity-related ETFs and volatility indexes. These have been the hardest-hit sectors this year and ETFs with leverage magnify that effect.
The biggest loser has been the Direxion Daily Gold Miners Bull 3x Shares (NUGT), which has lost 95% of its value in 2013. If that isn't a flashing billboard for the use of stop losses, I don't know what is.Putting that outlier aside, there are several other ETFs that I think warrant a closer look before the end of the year. Volatility Is Not Your Friend 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 more than 60% year-to-date.