1-Star ETFs Poised to Plunge: ProShares Ultra VIX Short-Term Futures?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, the ProShares Ultra VIX Short-Term Futures ETF (NYSE: UVXY  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at the ProShares ETF and see what CAPS investors are saying about it right now.

UVXY facts

Inception October 2011
Total Net Assets $291.2 million
Investment Approach Seeks to replicate twice the return of the S&P 500 VIX Short-Term Futures index for a single day. The VIX is a commonly followed measure of the expected volatility of the S&P 500 over the next 30 days.
Expense Ratio 0.95%
Alternatives VelocityShares Daily 2x VIX Short-Term ETN
iPath S&P 500 VIX Short-Term Futures ETN

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 59% of the 135 members who have rated the ProShares ETF believe it will underperform the S&P 500 going forward.

Just last month, one of those Fools, All-Star bbmaven, tapped the ProShares ETF -- as well as other VIX futures-based funds -- as a particularly risky long-term selection:

When volatility is high, they will spike. However, that averages around 10% of the time over the course of a year. When volatility is low, it costs the funds a great deal to continue to roll both the short term and longer term futures. When the longer term futures reflect [more] volatility than the shorter term futures (which is true about 90% of the time, resulting phenomenon is called contango -- UVXY will go down even if the [VIX] stays static. ...

In essence, each of these as long term investments are horrible -- they WILL go to zero eventually. In fact, they are designed to do so.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.


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