The ProShares UltraPro Short Dow30 ETF (SDOW) Down 30% in 2014
The ProShares UltraPro Short Dow30 ETF (NYSEArca: SDOW) is a leveraged exchange traded fund that seeks to match 300% of the inverse daily performance of the Dow Jones Industrial Average Index. In other words, the fund attempts to move three times as much as the index in the opposite direction on a daily basis. The fund seeks to invest its assets in common stocks, options, and derivatives of the index to provide leverage.
In 2014, shares of SDOW were down 30.28% for the year, which far exceeds three times the 7.52% that the Dow was actually up. The extreme underperformance is due to fees of 0.95% annually and a compounding effect.
Leveraged funds are specifically structured for traders looking to time the market and realize short-term profits based on the underlying index making single-day moves. Leveraged funds are generally not suitable for long-term investors, as the investment will ultimately lose value or significantly underperform, over a longer term, compared to its stated objective. In fact, Direxion Funds, a leader in leveraged ETFs, puts this disclosure in bold print on its web-page for each of its leveraged funds: “The fund should not be expected to provide [the multiple] times the return of the benchmark’s cumulative return for greater than a day.” Therefore, these leveraged funds are highly unsuitable for long term investors.
If your financial advisor or stockbroker recommended that you invest in the ProShares UltraPro Short Dow30 ETF, you may have options to recover your investment loss. If your advisor failed to fully disclose the risks of investing in the ProShares UltraPro Short Dow30 ETF, then you may have a claim for misrepresentation. If your investment objective was to only invest in safe and stable investments, you may have a claim for unsuitability. If the ProShares UltraPro Short Dow30 ETF made up a large portion of your portfolio, then you may have a claim for over-concentration and lack of diversification. If your advisor purchased this fund without your knowledge, you may have a claim for unauthorized trading. If your advisor purchased this fund on margin, you may have a claim for excessive use of margin and negligence.
The attorneys at Carlson & Associates, P.A., located in Miami, Florida, represent investors who have lost money due to the improper conduct of financial advisors. If you would like to have a free consultation, we can be reached at (305) 372-9700 to discuss your options.