Leveraged funds have come under fire, with a lawsuit currently against RXD's peer, UltraShort Real Estate ProShares ( SRS). RXD could face similar pressures as time wears on.

RXD's average daily trading volume is fewer than 8,000 shares, making this fund dangerously illiquid. While all leveraged funds are risky, RXD's double risk factor makes this fund one to avoid.

6. iPath S&P 500 VIX Mid-Term Futures ETN ( VAZ) and iPath S&P 500 VIX Short-Term Futures ETN ( VXX).

The much anticipated VXZ and VXX offer investors exposure to volatility plays. These ETFs track market volatility through the use of derivatives, and their complex strategies make them appropriate for only the most sophisticated investors.

Recent market fluctuations have made the topic of increased volatility a popular theme, and these products could be helpful in hedging a large, multilayered strategy. Average investors, however, should stay away from betting on volatility. Making a bet on volatility by itself is like sitting at a craps table and picking red or black.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion did not hold any positions in the ETFs mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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