This fund returned over 100% year-to-date. I’m still not buying it!

Update February 2018: Credit Suisse will shut down this fund after the heavy losses on February 5. Told you so!!!

Short Vol gone bad!
XIV is down 96% from the peak! (as of 2/8/2018)

I was hoping to tell you about a great new investment I researched recently. It’s an ETN (ETN=Exchange-Traded Note, similar but not identical to an Exchange-Trades Fund) with a phenomenal track record; year-to-date (as of October 20 when writing this) it’s up 141%! Since inception (November 30, 2010) it’s up by 1,079%, over 40% annualized compound return! But, as you can see from the title, I’m still skeptical!

Why do I even look at some exotic ETN/ETF? Aren’t we all supposed to be index investors? Buy your VTSAX and be done? Nope! I consider myself an index investor with an open mind. It’s very hard to outperform the index by picking individual stocks, but there are many other ways to deviate from index investing. For example, I like real estate investing and options trading. In both cases, it’s not really about beating the VTSAX but I like the return profiles and the diversification benefits.

So, back to that amazing ETN. The ticker is XIV and here’s the cumulative return chart since 2010. $100 would have grown to almost $1,200!

XIVstudy Chart02
XIV (inverse VIX ETN) and SPY (S&P500 index ETF) returns. 11/30/2010=100.

That looks like a pretty impressive run. It definitely got my attention! But after doing some more detailed analysis I realized this ETN is not for me. At least not right now. But what’s not to love about 1,000% return since 2010, when the S&P500 returned “only” 150% since then? That’s the topic of today’s blog post… Continue reading “This fund returned over 100% year-to-date. I’m still not buying it!”

Advertisements