1-Star ETFs Poised to Plunge: ProShares UltraShort 7-10 Year Treasury?

Market-lagging returns could be written in this one star.

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Sep 27, 2012 at 12:00AM

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, ProShares UltraShort 7-10 Year Treasury (NYSE: PST) 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.

PST facts

Inception April 2008
Total Net Assets $313.7 million
Investment Approach Seeks daily investment results that correspond to twice the inverse (-2x) of the daily performance of the Barclays U.S. 7-10 Year Treasury Bond Index. The index includes all publicly issued U.S. Treasury securities that have a remaining maturity of 7-10 years, are non-convertible, are denominated in U.S. dollars, are rated investment grade, are fixed rate, and have more than $250 million par outstanding.
Expense Ratio 0.95%
Year-to-Date / 1-Year / 3-Year Return (10.0%) / (13.1%) / (19.5%)

ProShares UltraShort 20+ Year Treasury

ProShares Short 20+ Year Treasury

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

On CAPS, 52% of the 82 All-Star members who have rated the ProShares ETF believe it will underperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star TerryHogan, succinctly summed up the PST bear case for our community:

While I'm not exactly keen on treasuries from these interest rate levels, I'm a firm believer in the crappiness of 2X leverage ETFs. They all degrade over time. Also, expense ratio is likely to rise at the end of Sept. 2012 which will lead to further underperformance.

If you want market-th umping returns, you need to protect your portfolio from any undue risk. Luckily, our special report on ETFs highlights three funds that are poised to soar in the next recovery. It's 100% free, but won't last forever, so click here to access it now.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.