Best and Worst ETFs to Start the Year
The Financial sector was one of the worst performing sectors during the 2008 turmoil. However, the segment has been soaring as of late, and has actually been one of the best performing sectors during 2012, with this largely continuing into 2013 as well (Banking ETFs 101).
In fact, of all the ETFs tracking the financial sector, the largest ETF namely Financial Select Sector SPDR (XLF) has shown a remarkable performance in the last few days. XLF is trading near its 52-week high, and if the trend continues then it may break out to new highs.
In the last trading session, the fund touched the 52-week high level of $17.09 but closed down 0.15% at $16.93. In the last four years, the $17.09 level has shown solid resistance (Five Best Performing ETFs (So Far) in 2012).
Although the fund is trading near to its 52-week high, a lot remains to be done in order to recover to the levels seen before the global financial crisis. Before the financial turmoil, the fund traded in the range of $30-$35 so it still needs to rebound in order to get back to its lofty pre-recession levels.
XLF manages an asset base of $9.8 billion and trades at volume level of more than 48 million shares a day. Its top three holdings include J.P. Morgan Chase, Berkshire Hathaway and Wells Fargo. The fund charges a fee of 18 basis points annually (Three Financial ETFs That Avoid Big Bank Stocks).
While XLF is on target to break and set new highs, volatility linked ETFs are setting new lows. VIX Index is generally considered to be the barometer of investor fear in the market since it measures the risk present in the market. ETFs that track VIX Index offer investors an opportunity to hedge against rising volatility in the market.
The CBOE Volatility Index has knocked down nearly 39% last week, the worst performance since 1990. VIX fell below $14 in the Friday trading session.
With this fall in the VIX Index, volatility exchange traded products such as iPath S&P 500 VIX Short Term Futures ETN (VXX) and VelocityShares Daily 2x VIX Short-Term ETN (TVIX) also slid downwards to set fresh lows (Volatility ETFs: Three Factors Investors Must Know).
With a slight rebound in the Monday trading session, VIX again slipped to its all time low since June 2007 in the last trading session. VIX closed the session at $13.81 while TVIX closed at an all time low of $6.85 and VXX at $27.24.
During the 2008 global financial crisis, these volatility based ETFs gained immense popularity, attributable to mounting fears among investors. In fact, fears related with fiscal cliff decision also resulted in investors shifting their asset base to these ETFs which led to the increase in prices of these products, albeit for a very short time period (4 Low-Volatility ETFs to Hedge Your Portfolio).
But now that fears related to the fiscal cliff have disappeared, these products are losing investor attention as many have shifted their assets to more risky investments. This move has caused the epic collapse in volatility ETFs as of late, and unless more worries materialize over the debt ceiling these products could continue to drop as we push further in 2013.
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Read the analyst report on XLF
Read the analyst report on VXX
Read the analyst report on TVIX
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Read the analyst report on XLF, VXX, TVIX
