March 27, 2008 at 1:00 pm by Tom Lydon
Year-to-date, the iShares Dow Jones US Telecom (IYZ) and the iShares S&P Global Telecommunications (IXP) exchange traded funds (ETFs) are down 20.8% and 13.7%, respectively. So, it’s probably a good time for the new ProShares UltraShort Telecommunications (TLL).
Launched alongside the ultrashort is the ProShares Ultra Telecommunications (LTL), designed to deliver twice the performance of the index. In other words, when the index rises by 1%, the ETF would rise by 2%. Keep in mind, this holds true for the flip side of the equation.
The telecommunications sector is dynamic and volatile at times, but rapidly changing technologies, and the quick spread of wireless communication, along with consumer and internet entertainment, are attracting investment in this sector.
The new ETFs are listed, but trading has not started, according to Trading Markets.
Short and leveraged ETFs can be used in a variety of ways, including:
- Continuing to profit, even in a sector downturn
- To get more bang for your investment buck
- To execute sector rotation strategies
- To easily adjust overall portfolio exposure
As with anything else, caution should be exercised with these types of funds. This magnified potential for gains can just as easily turn and magnify your potential for loss.
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