ProShares UltraShort S&P 500 ETF: A Good Or Bad Investment?

| About: ProShares UltraShort (SDS)

Summary

SDS seeks daily investment results that correspond to twice (200%) the inverse (opposite) of the daily performance of the S&P 500 Index.

Over the past five years this has not been a good investment.

Since inception this fund has, in fact, been a dreadful investment.

If past is prologue, this is a fund I would not invest in no matter what the inducements.

For those of you unfamiliar with this series of articles, they're basically an approximate five-year profit and loss review of a number of Exchange-Traded Funds (ETFs) and Closed-End Funds (CEFs) that primarily invest in and, hopefully, profit from dividends earned from their investments in preferred securities, which they then distribute to shareholders. This link will provide you the information necessary to fully appreciate and understand the following article, the differences inherent in CEFs and ETFs, and the remaining articles of this series. It will also serve to eliminate lots of reading redundancy for my regular readers.

This report concerns ProShares UltraShort S&P 500 ETF (SDS), hence the following description:

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Frankly, I'm forced to admit that I don't really understand how this fund operates. As best as I can tell is that it bets against the S&P 500, which thus far has been a terrible bet. Doubly bad because it has utilized leverage. Consequently, because I don't really understand this fund I will limit my comments to how well or badly it has performed strictly from the price of its stock and the dividends it has disbursed over the past five years.

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The chart above appears to reflect an investors worst investment nightmare. Over the past five years, this horror of a fund has fallen in price from $98.16 on 8/11/11 to its current $16.83. That's a loss of $81.33. Unimaginably worse, from inception this fund has fallen from $279.28 on it date of inception, 7/1/06 to its current price of $16.83, which is a whopping $262.45 loss per share. Normally, I like to state that one's profit or loss is usually determined by the entry prices of the shares purchased. In this case there is no entry point where these shares could have been purchased that would have resulted in a profit. This is probably the only fund I have reviewed thus far that has been a direct path to ruin and destruction of your investment.

Let's look at how the dividend distributions mitigated the losses, although it couldn't have been much considering the amount of losses there were. Sorry, but the last time SDS distributed a dividend was in 2008, years before our five year review. In fact this fund did a 4:1 reverse split on 10/1/12, which means investors have one quarter of the number of shares they first held.

In conclusion, this fund has been an unmitigated disaster for its unlucky investors. However, I'd appreciate if the more knowledgeable investors would review my conclusions because it's difficult for me to believe they have been this bad and that this fund still operates. Your observations would be most appreciated.

The following is the list of funds I have and will investigate to give you a clear picture how each has performed over the past five years. Initially, I had decided to judge each over the entire life of the fund, but was dissuaded by a number of followers who advised that the results would be unfairly skewed by the recessionary contraction of 2008-09. Here's that list of funds, which has grown considerably as a result of additions you requested: iShares U.S. Preferred Stock (NYSEARCA:PFF), PowerShares Preferred Portfolio ETF (NYSEARCA:PGX), Global X SuperIncome Preferred ETF (NYSEARCA:SPFF), PowerShares Financial Preferred Portfolio (NYSEARCA:PGF), VanEck Vectors Preferred Securities ex Financials (NYSEARCA:PFXF), SPDR Wells Fargo Preferred Stock ETF (NYSEARCA:PSK), PowerShares Variable Rate Preferred Portfolio (NYSEARCA:VRP), iShares International Preferred Stock ETF (NYSEARCA:IPFF), John Hancock Preferred Income Fund II (NYSE:HPF), First Trust Preferred Securities and Income ETF (NYSEARCA:FPE), Flaherty & Crumrine/Claymore Total Return Fund (NYSE:FLC), Flaherty & Crumrine/Claymore Preferred Securities Income Fund (NYSE:FFC), Flaherty & Crumrine Dynamic Preferred and Income Fund, Inc. (NYSE:DFP), Flaherty & Crumrine Preferred Income Opportunity Fund (NYSE:PFO), John Hancock Preferred Income Fund III (NYSE:HPS), Nuveen Preferred Income Opportunities Fund (NYSE:JPC), John Hancock Preferred Income Fund (NYSE:HPI), Clough Global Opportunities Fund (NYSEMKT:GLO), First Trust Strategic High Income Fund II (NYSE:FHY), First Trust High Income Long/Short Fund (FSD), Prudential Global Short Duration High Yield Fund (NYSE:GHY), ProShares UltraShort S&P 500 (NYSEARCA:SDS), First Trust Intermediate Duration Preferred & Income Fund (NYSE:FPF), Cohen & Steers Select Preferred and Income Fund, Inc. (NYSE:PSF), Virtus Global Multi-Sector Income Fund (NYSE:VGI), DNP Select Income Fund (NYSE:DNP), John Hancock Premium Dividend Fund (NYSE:PDT), Cohen & Steers Infrastructure Fund (NYSE:UTF), Flaherty & Crumrine Preferred Income Fund (NYSE:PFD), Clough Global Equity Fund (NYSEMKT:GLQ), Clough Global Allocation Fund (NYSEMKT:GLV), and Investco Dynamic Investment Opportunities Fund (NYSE:VTA).

Below is a screenshot taken from my IB platform that I populated to keep you apprised of the order of my reviews, and as a bonus, the funds' prices as I write 8/2/16.

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Notice, the 2015 dividends are placed just to the right of the fund symbols. To the right of that are the trade prices at the moment as on 8/2/16. Of further interest, at the far right of the screen, are the prices of the 13-week highs and lows of each fund.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.