SEF is not appropriate since it seeks to correspond to the daily performance of the Dow Jones U.S. Financial Index, and thus the long term performance will be the result of each day's returns compounded over the holding period. Is there an ETF that tracks a similar basket of securities (weighted heavily for banks like the DJ US Financial Index) but doesn't track daily returns?
this issue has been covered many times. I suggest u do a search. it might put some new colors in your paint box.
Honestly the only problem for a long term investor concerning SEF is it's an inverse fund. Leveraged long funds are fine if you know what you are doing.
First, SEF doesn't expose the holder to leverage, although it's sensitive to volatility. Second, as I explained in my original post, SEF tracks the *daily* returns (inversely), making it a poor long term instrument. Hence if you want to sit and wait for the eventual collapse of one or more of these banks (or hedge against such an event) this won't work. Do you understand why this is? SEF will not have returns equal to a short and hold. Read their prospectus if you don't understand. The only reason you'd buy and hold SEF is if you thought it would perform poorly *for the majority of days* between now and when you close the position, and if you believed the aggregate daily losses would be greater than the aggregate daily gains.
"I fail to see why that is a insurmountable problem for the long term investor." "Leveraged long funds are fine if you know what you are doing." your statements above show that you are clueless.
Yes I misread the profile thinking it was a leveraged inverse fund. All other statements are accurate. Of course if you don't know what you are doing I do encourage you to buy the long leveraged funds. I'll be glad to use your money.
As am I glad to see that you're so convinced that you do. Why don't you make the case for why SEF is good for an indefinite bear on financials, where as the fund is tracking (-daily performance).