Those that are fervent traders using leverage for anything longer than a day’s time is better off using a margin account, says Paul Justice for Morningstar.

Leveraged and short ETFs work better on a day-to-day basis, but over time, there tends to be tracking error as daily compounding takes a toll.  These funds are not meant to be bought and held.

A case in point that demonstrates the divergence over time is the MSCI emerging market versus leveraged ETFs. Vanguard Emerging Markets Stock ETF (VWO) tracks the index and has lost value, Short MSCI Emerging Markets ProShares (EUM) provides the inverse of the index and has gained value, but UltraShort MSCI Emerging Markets ProShares (EEV) has lost value over the same period as the other emerging market ETFs.

Another example in the energy sector with sister funds Ultra Oil & Gas ProShares (DIG) and UltraShort Oil & Gas ProShares (DUG). They have worked like they were supposed to, and consequently also lost in the long-term.

It is the common misconception that since it is “Ultra” or “Double” something then it should also provide double that of the returns or loses for those long investments. So how do they work? The fund’s fine print promises twice the daily return of the index, and the key word here is “daily.” By holding onto these ETFs for longer than their indicated compounding period mathematically guarantees one’s return would not double that of the index. The odds of getting nothing close to double the return increases the longer the ETF is held.

Back in November, Direxion introduced the triple-leveraged exchange traded fund, and the market embraced its new play toy. As market volatility has reigned in the last year, these types of funds are generating all kinds of interest and have been the subject of many back-and-forth debates.

Or take here is that not all products are right for all investors, but for investors looking for a hedge, these funds could have a home in their portfolios. The many available different long/short ETFs have a home in a portfolio if the user understands them, knows the risks and has decided he or she can handle it any volatility that comes along with them.

The decreased demand in commodities has also come during a time when international markets are weak, however, the ProShares MSCI Short Emerging Markets (EUM) can help investors capitalize on this index, says Don Dion of Seeking Alpha.

Market factors and regulation make investment in these types of funds risky, yet they can be useful as part of a larger investment strategy during times like these.

EUM tracks the inverse of the MSCI index, and emerging economies have been dealt their worst punches lately. All of the BRIC (Brazil, Russia, India, China) countries have been underperforming the United States, making investors question the diversification and decoupling points.

Felix Salmon for Seeking Alpha says that the countries may have risen together with the United States and then fallen together, but he hardly thinks they will rise again in unison the second time around.

Think of the BRICs on three main axes: politics, demographics, and commodities. While Russia and Brazil are huge commodities plays, they are polar opposites on a political and demographic scale, and Russian  politics have integrated into the price of their stocks, and will do so also to the Chinese stocks. Both Russia and China have a shrinking and aging  population.

For the long-term, Salmon sees the correlation between these countries going down. As of now, there are the declines: Brazil, down 55%; Russia down 65%; China down 57%; India down 58%. For now, the markets are reeling, but some of the most beaten down sectors could perform the best in a  recovery.

The Claymore/BNY BRIC (EEB) is down 45.4% year-to-date.