March 20, 2008 at 1:00 am by Tom Lydon
One sign of the turbulence in our markets: the top performing fund year-to-date is an ultra short.
The ProShares UltraShort QQQ (QID), which holds some of the biggest stocks in the Nasdaq 100, is up 48%, reports David Penn for Trading Markets.
Inverse funds such as these are designed to move in the opposite direction of its underlying index. In the case of QID, the "UltraShort" label means it delivers twice the opposite. These days, when the market seems to be heading down more than it’s moving up, short ETFs are popular with investors who want to keep earning, regardless of conditions.
Owning these funds comes with a special set of caveats, however. The market’s strong day yesterday is a case in point - if you owned a double short fund, you probably took a bit of a hit.
David Kathman for Morningstar suggests avoiding these risky funds. Many investors are going to do what they want, though, so we suggest that you be aware of exactly what you’re getting into and know when to step away.
Tags | NASDAQ
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