These products are a bit more complex than standard ETFs that track a basket of stocks. In doing so, though, investors should pay careful attention to how VIX ETFs work and learn about the potential risks and rewards associated with this subcategory of the ETF space.
Investors are not able to access the VIX index directly. This characteristic of VIX ETFs introduces a number of risks that investors should keep in mind, and that will be detailed below.
This product maintains a long position in first- and second-month VIX futures contracts , which roll daily. When volatility is high, stock market performance usually goes down; an investment in an inverse volatility ETF can help to protect a portfolio during these highly turbulent times. As this decay takes place, these ETFs have less money to use to roll into subsequent futures contracts as existing ones expire.
As time goes on, this process repeats itself multiple times, and most VIX ETFs end up losing money over the long term. Inverse volatility ETFs experience massive losses when volatility levels in the market spike.
This can be so dramatic that these ETFs can be virtually annihilated due to a single bad day or period of high volatility. For this reason, inverse volatility ETFs are not an investment for the faint-hearted, nor are they an appropriate investment for those without a strong knowledge of how volatility works. Interested investors should carefully consider the personnel managing any inverse volatility product before making an investment. It's also likely a good choice to see investments in inverse VIX ETFs as an opportunity for short-term gains, rather than for long-term buy-and-hold strategies.
The volatility of these ETFs is too extreme to make them a suitable long-term investment option. Many of these products are highly liquid , offering excellent opportunities for speculation.
Yahoo Finance. Technical Analysis Basic Education. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. If investors really want to place bets on equity market volatility or use them as hedges, the VIX-related ETF and ETN products are acceptable but highly-flawed instruments.
However, they certainly have a strong convenience aspect to them, as they trade like any other stock. Technical Analysis Basic Education. Advanced Technical Analysis Concepts. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.
I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
Compare Accounts. Best Ofs. More from. By Kat Tretina Contributor. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities.
Performance information may have changed since the time of publication. Past performance is not indicative of future results. Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. Miranda Marquit Contributor. Benjamin Curry Editor. The Forbes Advisor editorial team is independent and objective.
To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. This compensation comes from two main sources.
First , we provide paid placements to advertisers to present their offers. This site does not include all companies or products available within the market. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor. While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof.
Here is a list of our partners who offer products that we have affiliate links for.
0コメント