The 6 Worst-Performing ETFs

By Investopedia Staff | October 19, 2010 AAA

The first exchange-traded fund (ETF) came onto the American financial markets in 1993 when State Street Global launched the SPDR S&P 500 (NYSE:SPY). With an average volume of over 200 million shares traded, this original ETF is still the most popular ETF traded today - but that doesn't mean it gives the best returns. (For related reading, see Introduction To Exchange-Traded Funds.)
IN PICTURES: How To Make Your First $1 Million

One of the biggest advantages of ETFs is that an investor can create a diversified portfolio using a handful of different ETFs to cover the entire stock and fixed income market. Likewise, for investors who already have a sizable portfolio of individual stocks, more specialized ETFs can be a great way to augment holdings and provide entry into a wide variety of
sector, commodity, small-cap and emerging markets. Buying an ETF to represent an entire sector of the stock market can also be a great way to ride out a bullish trend on a specific sector.

However, trading in ETF does not totally eliminate the challenge of stock picking. Owning an ETF that tracks an out-of-favor sector will result in returns that significantly underperform the market.

Check out some of this year's worst-performing ETFs.

Company Net Asset Value YTD % Loss
Direxion Daily Real Estate Bear 3X Shrs (NYSE:DRV) 95.45M -67.75%
ProShares UltraShort Silver (NYSE:ZSL) 61.27M -60.35%
iPath S&P 500 VIX Short-Term Futures ETN (NYSE:VXX) 2.09B -57.50%
Direxion Daily China Bear 3X Shares (NYSE:CZI) 11.22M -57.39%
ProShares UltraPro Short Russell2000 (NYSE:SRTY) 25.65M -54.97%
Direxion Daily Small Cap Bear 3X Shares (NYSE:TZA) 627.60M -52.37%

Bottom Line
It's no surprise that most of the underperforming ETFs are leveraged ETFs. In these funds, losses are compounded two- or even three-fold as a result of the leverage used. This means that they will suffer more than similar ETFs that don't use leverage. (For related reading, please see Dissecting Leveraged ETF Returns.)

Use the
Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

You May Also Like

Related Analysis
  1. Stock Analysis

    Time to Look at PIMCO's Total Return Fund Again?

  2. Chart Advisor

    Four Stock Market Swing Trade Ideas

  3. Chart Advisor

    Use This ETF To Trade The Swiss Franc

  4. Chart Advisor

    3 Energy Related Stocks Poised For A Pop

  5. Chart Advisor

    Do Good Buys Remain Among Beaten-Down Financials?

Trading Center