Introduction
These ETFs use complex financial strategies to change direction in opposition to the direction VIX is moving. Investors' moods could become more pessimistic as economic uncertainty grows, increasing volatility. Investors will benefit if volatility rises and the price of VIX-inverse ETFs falls. In contrast, inverse VIX ETFs can gain value when uncertainty and optimism increase. For experienced traders, the Inverse VIX ETFs are typically used as part of a more extensive portfolio that includes other highly technical transactions. You must be aware that these funds carry a variety of risks and are extremely difficult to understand. Investors with concise time horizons should not use them in conjunction with the buy-and-hold strategy. Investors should be able to assess their risk tolerance level before investing in these assets.
Which VIX ETFs Are Worth Your Money?
Short-Term Futures ETF for the VIX (VIXM)
The expense ratio of 0.85 percent, a 3-year return of 58 percent. A total of $110 million in assets are being managed. The ProShares VIX Mid-Term Futures ETF tracks an index that measures the performance of VIX futures contracts with about five months left until the expiration date. It is a long-term investment. It's an excellent opportunity for investors looking to make a mid-term investment based on their perceptions of the market's volatility. This one's three-year yield of 58 percent is an incredible achievement compared to other VIX funds, given its use of derivatives. It has $110 million in assets and charges a 0.85 percent expense ratio, which equals $8.50 for every $1,000 invested in the fund.
S&P 500 ETN iPath Series B (VXX)
The expense ratio of 0.89 percent, assets under management of $692.8 million, and a three-year return of 36.64 percent. iPath Series B VIX ETN may interest investors looking for a short-term volatility-based investment option. This fund's VIX futures contracts use one or two-month expiration dates. The fund currently holds more than $692.8 million worth of assets. This is critical because it ensures that investors who plan to trade the fund will not have to worry about liquidity issues. A cost-to-income ratio of 0.89 percent, or $8.90 for every $1,000 invested. These funds have lost 36.64 percent in three years, proving that VIX ETFs are unsuitable for long-term investments.
Short-Term Futures ETF of ProShares' Ultra VIX ETF (UVXY)
An investment of $814 million in the assets under management has a three-year performance of -67.40 percent and an expense rate of 0.95 percent. The ProShares Ultra VIX Futures ETF is another option if you want to invest based on the performance of the S&P 500. Leverage is used to ensure that the fund can provide an annual return that is 1.5 times the change in the benchmark value. This can lead to higher returns, but it can also lead to more significant losses when taking on additional investment risk. The fund's assets are estimated at $814 million. Traders will be able to access this amount of liquidity. This fund has a cost rate of 0.95 percent, or $9.50 per $1,000 invested, making it the most expensive on the list. Over the past three years, the fund's value has dropped by nearly 70%.
The Simplify Premium ETF (SIMP) (SVOL)
The fund's assets total $105 million, with a three-year performance of N/A and an expense ratio of 0.54 percent. The Simplify Volatility Premium ETF is the newest addition to this list and will go into effect on May 12th, 2021. Despite its youth, the fund has already amassed $105 million in assets thanks to its distinctive investment strategy, unlike other funds that try to track the VIX. This fund buys VIX call options to lessen the impact of volatility fluctuations and sells VIX derivatives to other investors to generate income. Due to the fund's young age, it hasn't been put to the test yet. The fund's quarterly yield was 6.41 percent one year after its launch, but it's unclear how it will perform in the long run. With a cost-to-income ratio of 0.54 percent, or $5.40 for every $1,000 invested, it is the most cost-effective of our top 10.
Conclusion
VIX ETFs are funds designed to track changes in the VIX index, which is an index that rises when the market is volatile and falls when it is calmer. Investors can use VIX ETFs to speculate on the likelihood of market volatility. ETFs that track the VIX index rise in value when volatility does. Nevertheless, they aren't intended for long-term investors but rather for traders who are quick to buy and sell and want to protect their portfolios from another investment's potential loss or anticipate an increase in volatility shortly.
