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By Jared Cummans

The United States Natural Gas Fund (NYSEARCA:UNG) is by far the most popular ETF offering exposure to this fossil fuel. But the fund has come under heavy fire in recent years, as its failure to accurately track NG over the long term has been a point of contention for many. Since inception, the downward pressures on NG have made UNG one of the worst-performing ETFs of all time, as the product was forced to endure multiple reverse splits just to stay open. At its worst, UNG was sitting down 98% since inception, though it has recovered slightly in recent months.

In fact, UNG has never been able to finish out a calendar year in the black. The fund debuted in April 2007, making its first full calendar year 2008. Though the NG giant had a positive seven or eight months to close out 2007, it has been all downhill since. To give investors a better idea of just how poorly UNG has performed, we offer a chart of its annual performance for the past four years.

So if the fund has performed so poorly over time, why does anyone keep investing? The answer is quite simple: UNG was designed as a trading product and not as one for investors to hold over the long term. The fund is among the most liquid and tradable in the world, as it has more than $1.1 billion in total assets and trades more than 8.7 million shares on a daily basis. In reality, the fund should only be used by those who have the discipline and time to watch over its movements carefully.

Time to Turn it Around?

After one of the warmest winters on record, UNG hit its historical low early this year. But the fund was able to recover slightly through out the year and things may be looking up for 2013. Though the early forecast for this winter is a bit warmer than normal, the winter as a whole is projected to be much colder than the previous one. This means that demand and usage for NG-powered appliances will likely rise, allowing for the commodity and this fund to do the same.

With UNG taking a tumble in recent weeks and the forecast finally falling in its favor, the fund may be ready for its first positive calendar year ever. Of course, that still remains to be seen, given that it seems as if every day the supply and reserves of this fossil fuel expand. New technologies and extraction methods have made it easier than ever to find and use natural gas deposits, and those jumps in supply have a negative impact on prices. Keep a close eye on this ETF in the coming weeks; the stars may finally be aligning for UNG.

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Disclosure: No positions at time of writing.

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Source: U.S. Natural Gas Fund Woes Visualized