F
orget triple-leveraged Exchange Traded Funds.
Ignore ETFs that bet on turbocharged foreign markets, red-hot sectors like semiconductors, or the historic collapse in volatility.
The year’s best-performing fund has nothing to do with them. Instead, it’s a bet on cryptocurrency mania called the Bitcoin Investment Trust (GBTC, Rated “B+”). Backed by a firm called Grayscale Investments LLC, which bills itself as the “investment community’s trusted authority on digital currency investment,” the ETF soared an astounding 1,099% year-to-date through earlier this week.
That leaves all other funds we track in the dust, as you can see in this ETFs With Highest YTD Returns Screener below. It’s sorted in descending order by YTD gains, and contains other important details like Weiss Rating and Total Assets.
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| Data Date: 12/6/2017 |
How massive of a move is 1,099%? Well, the year’s next-best performers after GBTC are the Direxion Daily Homebuilders & Suppliers Bull 3X Shares (NAIL, Rated “B-”) and the Direxion Daily South Korea Bull 3X Shares (KORU, Rated “B”). Both use a significant amount of leverage so they rise (or fall) 3% for every 1% move in their underlying, tracked sectors. They sported YTD gains of “only” 245% and 157%.
Even highly successful plays on the gigantic decline in market volatility this year haven’t paid off like the bitcoin bet. The relatively obscure, $15.9 million REX VolMAXX Short VIX Weekly Futures Strategy ETF (VMIN, Rated “C+”) is up 155% so far in 2017, while the much better-known, $1.2 billion VelocityShares Daily Inverse VIX Short-Term ETN (XIV, Rated “B”) is up 144%.
Now before anyone asks the obvious question (“Should I invest in bitcoin?”), I’ll state up front that I’m no expert on cryptocurrencies. If you want to learn more about how bitcoin works, this recent Wall Street Journal story gives you some of the basics, as does this Bloomberg story (which has links to many other helpful ones).
But when you read articles like these, headlined “Bitcoin Mania: Even Grandma Wants In on the Action,” it doesn’t exactly make me feel warm and fuzzy on the inside. I saw the housing mania first hand here in South Florida in the mid-2000s. Before that, I experienced the dot-com mania first hand because I worked at an Internet company in the late 1990s and early 2000s. You know what they say: If it walks like a duck, and quacks like a duck, it’s a duck!
So sure, you can make ridiculous amounts of money when any asset is capturing the public imagination and multiplying in value month-in and month-out. But if you aren’t quick, nimble, and extremely sharp, you can lose a boatload of dough, too. Depending on how much leverage you use, and how much exposure you take on, you can even ruin your financial security and credit for years.
Until next time,
Mike
ike Larson is a Senior Analyst for Weiss Ratings. A graduate of Boston University, Mike Larson formerly worked at Bankrate.com and Bloomberg News, and is regularly featured on CNBC, CNN, Fox Business News and Bloomberg Television as well as many national radio programs. Due to the astonishing accuracy of his forecasts and warnings, Mike Larson is often quoted by the Washington Post, Chicago Tribune, Associated Press, Reuters, CNNMoney and many others.