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Investors Swarm 'Short,' Leveraged ETFs

Seesawing stock markets presented an opportunity to ride share prices going up and down.

Investors last month piled into "short" exchange-traded funds, which rise when equity markets fall, as some stocks took their worst beating in decades.

More surprising, however, was that they were attracted to leveraged ETFs, which exaggerate market moves.

Three of five newcomers to the accompanying list of September's popular ETFs, as measured by average daily dollar volume of turnover, were leveraged ProShares Ultra entries. Two of the three were of the ProShares Ultra Short variety, which moves opposite to respective benchmarks at accelerated velocities.

ProShares Ultra Short Real Estate

(SRS) - Get Free Report

, the 30th most popular ETF in August, advanced to 20th, while

ProShares Ultra Short Oil & Gas

(DUG) - Get Free Report

ascended from 21st to 19th on the list. The "long"

ProShares Ultra S&P 500

(SSO) - Get Free Report

gained nine positions to finish 16th.

The perils of leverage are apparent in SSO's drop of 19.6% in September, leaving its holders with a loss of 40% for the year.

Five of the more common ETFs from the August top-20 list, all members of the iShares family, failed to make the September list.

The once-trendy BRIC sector -- Brazil, Russia, India and China -- has been losing its luster, as witnessed by the absence of

iShares FTSE/Xinhua China 25

(FXI) - Get Free Report


iShares MSCI Brazil

(EWZ) - Get Free Report

from the adjoining list. Both were among the 20 most popular ETFs in August. The loss from the August list of


(MSFT) - Get Free Report

underscores the diminishing popularity of overseas investments.

Two of the worst-hit industries by the credit crunch lost representatives, as the

iShares Dow Jones Real Estate ETF

(MSFT) - Get Free Report

and the

iShares Dow Jones U.S. Financial U.S. Financial Sector ETF

(IYF) - Get Free Report

both failed to transition to the September roster.

Remaining at the top of the ETF popularity list was the


(SPY) - Get Free Report

, whose shares traded at an average rate of $26.6 billion per day in August. Its top holdings include blue chips

Exxon Mobil

(XOM) - Get Free Report


General Electric

(GE) - Get Free Report


AT&T Inc.

(T) - Get Free Report



(MSFT) - Get Free Report


SPY tumbled 9.4% in September and remains 19.4% in negative territory for 2008.

The second most popular ETF in September was the

PowerShares QQQ


, whose top holdings, in addition to Microsoft, include

Apple Inc.

(AAPL) - Get Free Report



(QCOM) - Get Free Report

QCOM and


(GOOG) - Get Free Report


The previous month's list of the 20 most popular ETFs can be seen at

Bruised Sectors Back in ETF Spotlight


Richard Widows is a senior financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.