But the five-year performance reflects the perils of investing in risky strategies over the long term, as the fund did produce strong short-term returns, increasing 27.76 per cent in one year due to falls on the US share market.
While share prices are volatile over the short and medium term, they tend to rise more than they fall over the long term. The recommended minimum time frame for sharemarket investments is five years, preferably longer.
The best performer over the five years is the BetaShares Global Cybersecurity ETF, with an average annual compound return over five years of almost 18 per cent.
The next best performer is also provided by BetaShares – the NASDAQ 100 ETF – with an average annual compound return of 17.29 per cent over five years. The return is minus 15 per cent over the past year as the tech-laden US shares index fell on rising interest rates.
The Global X Palladium ETF is third with an average annual compound return of 17.1 per cent over the five years and 9 per cent over the past year. The price of palladium, a metal used in car catalytic converters and in electronic devices, has increased over much of the 5-year period.
A spokesperson for BetaShares says the performance of its inverse ETFs, also known as “short” funds, is “no surprise” given the strength of global markets in recent years. “These ETFs have performed as expected,” the spokesperson says.
“They are not ‘set and forget’ investments and are more suited to those who are seeking some protection against short-term volatility within an investment portfolio,” the spokesperson says.
Chris Brycki, founder of Stockspot, an online investment adviser, says the best way to avoid big losses is to stay clear of “exciting” ETFs, which can be launched at the peak of interest in the theme.
Investors can find themselves jumping on a theme just as the best of the returns have passed, he says. Australian-listed ETFs that track the price of cryptocurrencies, such as Bitcoin and Ethereum, were launched earlier this year. Though past downturns in the crypto have been short-lived, those ETFs are well down on their prices on debut.
Stockspot’s Brycki says long-term investors should stick with simple and trusted broad-market ETFs, rather than ETFs that depend on timing the market, which is impossible to do consistently.
Justin Walsh, associate director of manager research at Morningstar, says the “inverse-style” ETFs are “incredibly volatile” and he would like to see them come with strongly worded warnings.
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- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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