Index Funds on Steroids

It is no news that financial sector has been in a steep decline for a couple of months now. Some would argue this is the best time to start buying up some of the depressed quality financials. While it is probably a good exercise to examine a couple of big banks, there is a much easier Existing Alternative - simply buy in into the whole segment. There is a way to do that and accelerate one’s returns as well.

Good people at ProShares have a whole family of different ETFs that do just that. In the example of the financial sector fund, UYG, it is structured in such a way that it doubles daily return of the underlying index (when the index go up 1%, the fund is up 2%, etc.) Now, if you think the financials are undervalued, this thing would be twice as undervalued, how is that for value shopping!

There are funds for all tastes, including wider market indices and even the reversals (index goes up, the fund goes down, by the same %). It is definitely worth checking out. For all this excitement the expense ratios are fairly low – roughly at 1%.

A Canadian company Horizons BetaPro, not to be left behind launched its own family of funds with similar aspirations. These are designed for a Canadian investor, with the more Canadian level of fees at around 1.5%.

Now imagine if you buy any of these on margin… If the S&P goes up by 10%, the fund is up by 20%, your equity is up 40%, especially with today’s low margin rates…