Pass on this ETF: Betapro Gold Bullion 2x Daily Bull ETF

Article Excerpt

If you expect the price of an asset to rise, you may be tempted to buy ETFs.using borrowed funds to boost their returns. But beware—leveraged ETFs often have big added risks. Leveraged ETFs use a combination of derivatives and debt to double or triple any value gains for the asset or index they track. Here is one example: Horizons offers the BETAPRO GOLD BULLION 2X DAILY BULL ETF $12.18 (Toronto symbol HBU), which aims to provide 2 times the daily percentage change in the near-term futures price of gold. If HBU is successful in meeting its investment objective, its price should gain or lose approximately two times as much, on a percentage basis, as the gold futures price. The short-term performance of the ETF was spectacular with a 64% gain over the past year, almost double the increase in the gold price. However, if we go back 10 years, the ETF lost about 10% of its value compared to the 42% gain for gold. It was…

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