SeeTheLight

Wednesday Outlook: Commodities, Global Markets

Hey Dave,

A question for you. Any ETF that seeks to track the daily performance of an index suffers from decay if you hold the ETF long term. These effects are exacerbated when the ETF results are leveraged. This is generally understood by experienced traders, but poorly understood by retail investors, which is the reason for much of the angst towards these instruments.

Of course, for 1x Long performance you can always purchase a spider like SPY to avoid this decay. But if you were wanting a short version, do there exist any ETFs which do not have this decay?

If so, that might be preferable to shorting which requires margin and has the risk of unlimited loss, whereas an ETF limits the risk to your investment.

Thanks!