Pass on this ETF

Article Excerpt

VELOCITYSHARES DAILY 2X VIX SHORT-TERM ETN $47.22 (Nasdaq symbol TVIX) is an exchange-traded note (ETN) that tracks the VIX Short-Term Futures Index. While they are technically debt instruments like bonds, ETNs pay no interest and offer no protection for an investor’s principal. In many ways, they are like ETFs. Market volatility normally increases during sharp market declines. As a guideline, market volatility as measured by the VIX Short-Term Futures Index runs between 10 and 20 during normal market conditions. During the 2008/2009 market crash, the volatility index reading rose to over 75. Even with the relatively mild October 2018 correction, the volatility index doubled, moving from 12 to 24. Over that month, the VelocityShares ETN jumped from $25 to $55 for a return of 120% in less than four weeks. However, the VIX math that goes into computing the VIX grew out of academic studies of volatility. It’s complex, and is meant only as a short-term indicator. For example, the Dow Jones Industrial Average and the S&P 500 both…