Tuesday, March 31, 2009

Investing in FAS and FAZ

FAS and FAZ are the 3X leveraged financial sector ETF run by Direxion. As has been pointed out on this blog on numerous occasions, these leveraged ETFs are horrendous instruments. Here is more proof.

The chart below shows what would have happened if you had invested $10,000 in FAZ and $10,000 in FAZ, i.e, in both the long and the short fund, for a total of $20,000.

(please click on image to enlarge).

$20,000 became $4.2k. The question is, where did the other $15.8k go?

Do not walk, run from these investments. You have better odds at a casino.

Now, at inception, apparently there were 20M shares for FAZ, and 200M shares for FAS. At launch prices, that is a total of $6.78B. Today's value is $1.46B.:

I cannot yet verify the number of outstanding or issued shares, but the cumulative return matches the one for the $20k investment. Now, at inception not all units were sold or placed, but that was the valuation. Nearly $5B were lost in valuation, that is a loss of valuation of approximately $60M per day.

Stumble Upon Toolbar

No comments:

Financial TV

Blog Archive

// adding Google analytics