Investors Swarm 'Short,' Leveraged ETFs
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 Report
, the 30th most popular ETF in August, advanced to 20th, while
ProShares Ultra Short Oil & Gas
(DUG) - Get Report
ascended from 21st to 19th on the list. The "long"
ProShares Ultra S&P 500
(SSO) - Get 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 Report
and
iShares MSCI Brazil
(EWZ) - Get Report
from the adjoining list. Both were among the 20 most popular ETFs in August. The loss from the August list of
iShares MSCI EAFE
(MSFT) - Get 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 Report
and the
iShares Dow Jones U.S. Financial U.S. Financial Sector ETF
(IYF) - Get Report
both failed to transition to the September roster.
Remaining at the top of the ETF popularity list was the
SPDR S&P 500 ETF
(SPY) - Get 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 Report
,
General Electric
(GE) - Get Report
,
AT&T Inc.
(T) - Get Report
and
Microsoft
(MSFT) - Get 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
(QQQQ)
, whose top holdings, in addition to Microsoft, include
Apple Inc.
(AAPL) - Get Report
,
Qualcomm
(QCOM) - Get Report
QCOM and
(GOOG) - Get 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 TheStreet.com Ratings. Prior to joining TheStreet.com, 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.
