I took a look back at the dividends paid by this fund in the past couple years before unemployment went so outrageously south. I found dividends of sometime 40,50, 60 cents a month.
Once the whole economy stablizes. People are working again, real estate has started appreciating again and the worst is behind us (which IMO has come or is very very near) I will be holding an investment I paid $3.98 for that pays me 50cents a month. Do the math and you will see that if this ever comes to past I will have made one hell of an investment, also consider I could probably sell a share for $40 or a 10 times what I paid.
I'm bull on REITs, but:
You have no idea what you are talking about.
You have not researched the holdings of URE.
You probably don't know what a swap is.
You haven't looked into the mathematical decay of 2X ultra funds.
You probably haven't read the prospectus.
The underlying holdings are probably 1/2 swaps. I say probably because I didn't actually add up the holdings of and compare. The other 1/2 that is individual REIT stocks would probably pay around 8% in dividends to the fund right now (at current trading prices). But since that's only 1/2 the holdings, that's more like a 4% yield coming from the actual REIT holdings in relation to the fund size. The rest of what they paid out is probably gains from renewing the swaps in situations where the renewal price is cheaper than the prior price (like bakwardation/contango in the futures markets). Hardly something to count on.
Also, since the fund has mathematical decay, the overall value of the swaps would be less over time resulting in fewer gains of any kind from this portion of the portfolio. Certainly invalidates projecting future dividends based on past ones.
Only a moron who didn't read the prospectus and do their research would buy this as a long term dividend play.
Look at something like VNQ for a long term REIT play. It's got lower fees than IYR and it excludeds mortgage REITs. If you have to have leverage, look at some of the closed end REIT funds like RPF, JRS, NRO, IGR, RWF, etc... They use the old kind where they borrow $0.30 and invest $1.30 for every $1.00 in the fund. That means they can get a margin call if the market falls to far (probably would have to fall below march lows at this point), but at least they don't decay over time like a 2X fund.
But I'm sure this board will eventually be filled with people complaining some conspiracy caused them to lose their money just like all the ultrashort boards. It will never be because the people didn't research and understand what they were buying.
Bit touchy eh? Thanks for the info. I did not read the prospectus. I never heard of mathmatical decay, but I think I now understand about not being a long term buy.
My apologies to the board for this post. I will look into the
REIT funds you recommended, Thanks
I understand the decay! The issue is you do not have to trade something daily. The SWAP is a part of this but so is the DIV and the holdings. You can trade this thing on the normal swings the actual stocks are trading. The EFT is not going to decay to zero, correct?
If you look at the 1-yr chart of both URE and its inverse SRS... you don't want to hold these leveraged etf's long term.
Why both of them are now crawling at the bottom of the graph is that thing called decay. Eventually both will approach near 0 over time!
The disturbution is quarterly. Do not quote me. 2007 was around $1.45 for the total year and 2008 was around $.75 for the total year.
Now back to the trading comment. Trading this ETF on a daily bases is a fools game. I am "a trader" but understand that at the bottom of the market several 100% can be made over time. I may trade this 4 or 5 time over a 6 month period. You do not have to trade anything daily. I would not trade my options that way either.
No, of course it isn't. Divs are paid quaterly on this ETF.
The problem with thinking this is a long-term buy is that it isn't, nor is it set up to be. 2X's are day to day trading stocks. Also, this can go to 0 (or within hundredths of a cent of 0), just like other stocks. Here's another high flier that profiled a lot like URE (after all, energy is always going to be around, right?):