Tristan Yates - Seeking Alpha 'Tristan Yates' Tag RSS Syndication from SeekingAlpha.com SeekingAlpha.com http://seekingalpha.com/author/tristan-yates The Case Against Leveraged ETFs http://seekingalpha.com/article/35789-the-case-against-leveraged-etfs?source=feed 35789 Tristan YatesTristan Yates and Lye Kok (IndexRoll) submit: The Leveraged ETF offensive is under way. A year ago, there were no leveraged ETFs in existence. Today, there are at least fifty leveraged ETF products in the marketplace and another fifty in the SEC/AMEX pipeline. By this time next year, perhaps every traded ETF will have a 2x leveraged counterpart. Are these leveraged ETFs suitable for retail investors? No, they are not.

In this article, we lay out the case against these products, based upon popular misconceptions of what exactly these ETFs provide, a hidden trap related to leverage, and the poor performance of related funds and of the ETFs themselves.

]]> Thu, 17 May 2007 09:30:46 -0400 Tristan Yates Tristan YatesTristan Yates and Lye Kok (IndexRoll) submit: The Leveraged ETF offensive is under way. A year ago, there were no leveraged ETFs in existence. Today, there are at least fifty leveraged ETF products in the marketplace and another fifty in the SEC/AMEX pipeline. By this time next year, perhaps every traded ETF will have a 2x leveraged counterpart. Are these leveraged ETFs suitable for retail investors? No, they are not.

In this article, we lay out the case against these products, based upon popular misconceptions of what exactly these ETFs provide, a hidden trap related to leverage, and the poor performance of related funds and of the ETFs themselves.


Complete Story »]]> DDM DGP DIG DZZ MVV QLD ROM RXL SAA SSO UCC UGE UKF UKK UKW UPW URE USD UVG UVT UVU UWM UXI UYG UYM Tristan Yates Leveraged ETFs: A Value Destruction Trap? http://seekingalpha.com/article/31195-leveraged-etfs-a-value-destruction-trap?source=feed 31195 Tristan YatesTristan Yates and Lye Kok (IndexRoll) submit: The Constant Leverage Trap is a well-known problem in financial modeling. Attempting to maintain a constant leverage ratio in a portfolio over a long period of time will eventually lead to the portfolio selling off almost all of its assets in the worst of market conditions. This problem was largely academic until recently, when two companies, ProShares and Rydex launched a set of leveraged ETFs that seek to track double the return of the S&P 500 Index.

The leveraged ETFs are: ProShares Ultra QQQ ETF (QLD), ProShares Ultra S&P500 ETF (SSO), ProShares Ultra MidCap400 ETF (MVV), ProShares Ultra Dow30 ETF (DDM), ProShares Ultra Russell2000 ETF (UWM), ProShares Ultra SmallCap600 ETF (SAA), ProShares Ultra Russell1000 Value ETF (UVG), ProShares Ultra Russell1000 Growth ETF (UKF), ProShares Ultra Russell MidCap Value ETF (UVU), ProShares Ultra Russell MidCap Growth ETF (UKW), ProShares Ultra Russell2000 Value ETF (UVT), ProShares Ultra Russell2000 Growth ETF (UKK), ProShares Ultra Basic Materials ETF (UYM), ProShares Ultra Consumer Goods ETF (UGE), ProShares Ultra Consumer Services ETF (UCC), ProShares Ultra Financials ETF (UYG), ProShares Ultra Health Care ETF (RXL), ProShares Ultra Industrials ETF (UXI), ProShares Ultra Oil & Gas ETF (DIG), ProShares Ultra Real Estate ETF (URE), ProShares Ultra Semiconductors ETF (USD), ProShares Ultra Technology ETF (ROM), and the ProShares Ultra Utilities ETF (UPW).

]]> Mon, 02 Apr 2007 00:46:12 -0400 Tristan Yates Tristan YatesTristan Yates and Lye Kok (IndexRoll) submit: The Constant Leverage Trap is a well-known problem in financial modeling. Attempting to maintain a constant leverage ratio in a portfolio over a long period of time will eventually lead to the portfolio selling off almost all of its assets in the worst of market conditions. This problem was largely academic until recently, when two companies, ProShares and Rydex launched a set of leveraged ETFs that seek to track double the return of the S&P 500 Index.

The leveraged ETFs are: ProShares Ultra QQQ ETF (QLD), ProShares Ultra S&P500 ETF (SSO), ProShares Ultra MidCap400 ETF (MVV), ProShares Ultra Dow30 ETF (DDM), ProShares Ultra Russell2000 ETF (UWM), ProShares Ultra SmallCap600 ETF (SAA), ProShares Ultra Russell1000 Value ETF (UVG), ProShares Ultra Russell1000 Growth ETF (UKF), ProShares Ultra Russell MidCap Value ETF (UVU), ProShares Ultra Russell MidCap Growth ETF (UKW), ProShares Ultra Russell2000 Value ETF (UVT), ProShares Ultra Russell2000 Growth ETF (UKK), ProShares Ultra Basic Materials ETF (UYM), ProShares Ultra Consumer Goods ETF (UGE), ProShares Ultra Consumer Services ETF (UCC), ProShares Ultra Financials ETF (UYG), ProShares Ultra Health Care ETF (RXL), ProShares Ultra Industrials ETF (UXI), ProShares Ultra Oil & Gas ETF (DIG), ProShares Ultra Real Estate ETF (URE), ProShares Ultra Semiconductors ETF (USD), ProShares Ultra Technology ETF (ROM), and the ProShares Ultra Utilities ETF (UPW).


Complete Story »]]> DDM DIG MVV QLD ROM RXL SAA SSO UCC UGE UKF UKK UKW UPW URE USD UVG UVT UVU UWM UXI UYG UYM Tristan Yates Indexing On Steroids http://seekingalpha.com/article/28161-indexing-on-steroids?source=feed 28161 Tristan YatesTristan Yates and Lye Kok (IndexRoll) submit: Here’s a recap of 40 years of discussion and analysis of Index investing:

  1. Indexed Investing is the only equity investment strategy with decades of performance-related statistics available. Since 1927, the Index has a CAGR of +10.27% over an 80-year history.
  2. Popularized by John Bogle and based upon academic work by Eugene Fama, Indexing was originally derided as “un-American” because the perception was that investors should settle for average rather than exceptional performance.
  3. However, Indexing offers superior and more consistent returns than most actively managed funds. For example, Bogle’s Vangard S&P 500 fund has beaten the performance of over 90% of other mutual funds over the last ten years.
    Most of the superior performance of Index tracking funds is due to stock selection, but lower turnover costs and management expenses are also factors.
  4. Later work by Fama & French led to the creation of other indexes weighted by market cap and book value. Investors now usually hold multiple indexes to improve diversification. For example, small-cap value stocks have returned +13.3% annually over 80 years but have higher volatility.

Indexing is firmly established in the investing marketplace. Over $1 trillion is currently indexed, and there are estimates that one-third of all new money flowing into common-stock money market funds is invested in some type of index fund.

]]> Wed, 28 Feb 2007 00:50:46 -0500 Tristan Yates Tristan YatesTristan Yates and Lye Kok (IndexRoll) submit: Here’s a recap of 40 years of discussion and analysis of Index investing:

  1. Indexed Investing is the only equity investment strategy with decades of performance-related statistics available. Since 1927, the Index has a CAGR of +10.27% over an 80-year history.
  2. Popularized by John Bogle and based upon academic work by Eugene Fama, Indexing was originally derided as “un-American” because the perception was that investors should settle for average rather than exceptional performance.
  3. However, Indexing offers superior and more consistent returns than most actively managed funds. For example, Bogle’s Vangard S&P 500 fund has beaten the performance of over 90% of other mutual funds over the last ten years.
    Most of the superior performance of Index tracking funds is due to stock selection, but lower turnover costs and management expenses are also factors.
  4. Later work by Fama & French led to the creation of other indexes weighted by market cap and book value. Investors now usually hold multiple indexes to improve diversification. For example, small-cap value stocks have returned +13.3% annually over 80 years but have higher volatility.

Indexing is firmly established in the investing marketplace. Over $1 trillion is currently indexed, and there are estimates that one-third of all new money flowing into common-stock money market funds is invested in some type of index fund.


Complete Story »]]> EFA MDY SPY Tristan Yates