As Financials Rally, Is the Steady Vanguard Financials ETF or the Leveraged ProShares Ultra Financials the Better Buy Right Now?
ProShares' 2x leverage amplifies daily returns but introduces leverage decay risk and deeper drawdowns. Vanguard's broad 427-stock portfolio delivered steadier gains with a 0.89 beta versus 1.74.
Overview
Choosing between Vanguard Financials ETF (NYSEMKT:VFH) and ProShares - Ultra Financials (NYSEMKT:UYG) involves weighing the benefits of a low-cost, broad-market index fund against a highly volatile leveraged tool designed for short-term traders.
The financial sector encompasses everything from global banking giants to regional lenders and payment processors. Investors looking for exposure here could choose VFH for market-tracking stability or UYG for amplified daily returns. While VFH tracks a market-cap weighted index for long-term growth, the ProShares fund seeks double the daily return of its benchmark, which introduces risks from leverage decay over longer periods.
Details
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield as of the close of trading on July 23. Dividend yield for UYG excludes a short-term capital-gains payout to shareholders.
Source
Originally published at www.fool.com.