Triple Leveraged ETFs Are Not Suitable For Most Long-Term Investors

I have been a big fan of Exchange Traded Funds (ETFs) ever since they gained mass appeal during the late 1990s. ETFs tend to have lower management fees than most corresponding mutual funds and can be traded throughout the trading day instead of only at the end of the trading day as is the case with almost every mutual fund. ETFs are also very popular because almost every ETF tracks a particular stock market index. ETFs have especially driven down costs for individual investors investing in foreign equities.

In recent years some of the ETF sponsors such as Proshares and Rydex began introducing leveraged ETFs that utilize derivatives in an effort to produce daily price movements that are a multiple of the daily price movements of the underlying index. For example, if the S&P 500 Index were to increase 1% during a day, a leveraged ETF providing twice ("2x") the daily movement of the S&P 500 Index would increase 2% if it were able to meet its stated objective.

Proshares and Rydex also introduced bear or inverse ETFs that aimed to generate returns corresponding to a negative multiple of an underlying index. For example, if the S&P 500 Index were to rise 1%, a -2x S&P 500 ETF would decrease by 2% if it were to meet its stated objective.

The leveraged ETFs quickly became popular with investors and then another leveraged ETF provider, Direxion, entered the picture in 2008. Direxion offers many leveraged ETFs, including some that offer triple (3x) leverage. Several of Direxion's triple leveraged ETFs quickly became hits with investors. In particular, the Direxion Daily Financial Bull 3x ETF (symbol: FAS) and the Direxion Daily Financial Bear 3x ETF (symbol: FAZ) rapidly gained acceptance and were even blamed by many investors for an increase in stock market volatility at the end of 2008.

Although investors can make a lot of money in a short period of time by purchasing leveraged ETFs, these trading vehicles, especially the bear leveraged ETFs, are not suitable for long term investors. Many small investors have purchased leveraged ETFs without fully understanding how the ETF leverage is applied. Many investors assumed that the if they held a leveraged ETF for a certain period of time, such as one year, the a 2x bull ETF would rise about twice as much as the underlying index being tracked. However, this is not the case. All of the leveraged ETFs currently offered provide leverage that resets daily.

The daily resetting of the leverage can quickly destroy investor gains during a volatile market. For example, if the S&P 500 closed at a value of 1000 on one day, and then dropped 10% the next day (a drop to 900) and then rose 10% on the following day (an increase to 990), by the end of the third day, the S&P 500 would be 10 points, or 1% below where it was on the first day (e.g., at 1000). A 3x bull (triple leveraged) ETF, however would drop far more than 1%. For example, if the 3x bull ETF closed at 1000 on the first day, it would drop 30% on the second day (a drop to 700) and would subsequently rise 30% on the second day (from 700 to 910). Accordingly, by the end of the third day the 3x bull ETF would be 9% lower than it was on the first day. Investors refer to this disparity in returns of leveraged ETFs relative to the daily stated objective as "leveraged decay." An excellent detailed explanation of leveraged decay may be found at the Quantum Fading blog.

As a result of leveraged decay, triple leveraged ETFs are therefore not suitable for most long-term investors. Over long periods of time practically all triple leveraged ETFs will lose money and the bear triple leveraged ETFs will lose money the quickest in most markets.

I have been following the daily closes of the Direxion Daily Small Cap Bear 3X ETF (symbol: TZA), which aims to return -3x leverage relative to the daily closes of the Russell 2000 Index. TZA was introduced on November 19, 2008. However, I have obtained daily historical closing data for the Russell 2000 Index dating back to May 22, 2000 from the iShares website. Operating under the assumption that TZA provides exactly -3x leverage I was able to hypothesize the closing values of TZA dating back to May 22, 2000.

The results of my investigation are interesting and clearly show TZA is unsuitable for long-term investors. I created a chart of calendar returns from 2001-2009 and of returns for (a) the partial year in 2000 starting on May 22, 2000; and (b) the partial year in 2010 up through September 17, 2010. The chart is shown below (click on the image for a larger view).


As shown above, TZA would have lost money in every year except for 2002 when TZA would have gained 36.028% while the Russell 2000 Index lost 20.483%. Note that TZA would have actually lost 3.31% during the awful 2008 market when the Russell 2000 Index plummeted 33.787%. The primary reason for the loss during 2008 is the excessive market volatility during that time period.

TZA would have lost 99.70% of its value between May 22, 2000 and September 17, 2010, whereas the Russell 2000 Index actually gained 58.16%. Using the historical index data and working backward from the TZA daily closing data I have since November 17, 2008, I determined that the closing value of TZA on May 22, 2000 would have been 9976.89.

Although TZA would have lost almost all of its value over the past ten years, there are some time periods when the market plummeted and TZA would have soared in value. In the most extreme case, TZA would have soared about 300% from 175.31 on September 19, 2008 to 702.70 on November 20, 2008, a time period of a mere two months. However, such gains would be short-lived as TZA dropped back down to 169.16 by April 16, 2009 and fell below 100 on July 20, 2009.

TZA and other triple leveraged ETFs are therefore unsuitable for most long-term investors. Individual investors would be well-suited to stick to regular ETFs and leave the triple and double leveraged ETFs to day and short-swing traders.

Proshares Offers a Wide Variety of Interesting Leveraged ETFs

ProShares offers a wide variety of interesting Exchange Trade Funds ("ETFs") that may be suitable to some inventors. The investment company applies financial leverage to implement trading strategies that would be prohibitively difficult for most small investors to replicate. The company’s most interesting offerings are its Short ProShares and Ultra ProShares ETFs.

The Short ProShares ETFs track the inverse of certain indices. ProShares offers Short ETFs that track the inverse of indices such as the Nasdaq 100, the Dow Jones Industrial index (i.e., the Dow 30 index), the S&P 500 index, the S&P 400 MidCap index, and the Russell 2000 index. The ProShares ETFs hold financial instruments such as futures contracts, options, and swap agreements to track the inverse of the respective indices.

The Ultra ProShares are designed to return twice the daily performance of the respective indices being tracked. Some of the more popular Ultra ProShares ETFs include ones that track twice the performance of the Nasdaq 100, the Dow 30 index, the S&P 500 index, the S&P 400 MidCap index, and the Russell 2000 index. The Ultra ProShares ETFs also hold a variety of financial instruments in an effort to achieve their intended strategies.

ProShares also offers UltraShort ETFs that track twice the inverse of select indices, such as the Nasdaq 100, the Dow 30 index, the S&P 500 Index, the S&P 400 MidCap Index, and the Russell 2000 index.

The ProShares ETFs are not for the faint of heart, as they are extremely volatile. However, they are suitable for more experienced investors who wish to make plays on movements of certain indices, such as the S&P 500 index.

Although investors can ordinarily sell short ETFs or purchase or sell futures contracts to profit on the fall in price of indices, the ProShares ETFs offer some advantages. For example, a typical investor selling short an ETF would be subject to potential margin calls and potentially unlimited losses in the event that the ETF that was sold short rapidly increases in value. By purchasing a Short ProShares ETF, on the other hand, the same investor would not be subject to margin calls and the potential losses would be limited to the investor's purchase price of the Short ProShares ETF.

I personally like some of the Ultra ProShares ETFs, such as the Ultra MidCap 400 ETF. The long-term annual returns of MidCap stocks are somewhere around 11-12%, and the Ultra MidCap 400 ETF should exceed those returns over time.

It should be appreciated that due to transaction costs (e.g., the cost of purchasing the futures contracts and options, as well as the cost of running and advertising the various ETFs), it is not possible to return exactly the inverse of an index or twice the return of the index. Moreover, the Ultra ProShares ETFs, for example, are designed to return twice the daily return of a tracked index, as opposed to twice the annual return. Accordingly, in flat markets the Ultra ProShares ETFs may substantially trail double the returns of the tracked index over extended periods of time, although the returns are much closer to that of twice the tracked index during volatile markets.

The iShares Emerging Markets ETF Does a Poor Job of Tracking the MSCI Emerging Markets Index

The iShares Emerging Markets ETF (symbol: EEM) and the Vanguard Emerging Markets ETF (symbol: VWO) both track the same index, the MSCI Emerging Markets Index. However, iShare's EEM has underperformed the underlying index by about 5% so far in 2007 due to a tracking error. Through the end of August 2007, EEM had appreciated about 17.33% for the year, whereas Vanguard's VWO had appreciated about 22.10%. The reason for the performance difference from the two ETFs that track the same index is due primarily to sampling techniques and, to a lesser extent, the larger expense ratio of EEM (0.75%) versus that of VWO (0.30%).

Index funds often fail to purchase all of the securities in the index being tracked. As I understand it, the funds often do this because some of the securities in the index are not very liquid and the purchase of even a small number of shares can substantially move the price of some securities. Moreover, the transaction costs can theoretically be reduced by purchasing a smaller number of different securites in a smaller number of trades.

There are 830 different securities in the MSCI Emerging Markets Index. iShares' EEM holds shares of 552 securities of the MSCI Emerging Markets Index. VWO, on the other hand, holds shares of 858 securities (i.e., VWO holds shares of some securities that are not even in the index in an effort to better track the index).

I'm not sure how iShares decides which of the securities to hold and which to avoid. However, EEM's 5% tracking error this year is very disconcerting. I own shares of EEM in my own accounts. I purchased them a couple years ago because EEM had a much larger trading volume than VWO and the bid/ask spread was lower. However, the trading volume of VWO has definitely increased over the past year or so and the bid/ask spread has been decreasing. From now on, I will probably only purchase shares of VWO because it does a much better job of tracking the MSCI Emerging MArkets Index.

Barclay's Offers an Indian Stock Market ETN (Not an ETF)

A couple months ago, I wrote a post about the iPATH MSCI India Index exchange traded security (symbol: INP) that tracks an India stock market index. I indicated that this was the first India stock market Exchange Traded Fund ("ETF"). However, I have since discovered that INP is an Exchange Traded Note ("ETN"), not an ETF.

The ETN is a derivative (perhaps similar to futures) that is designed to track the MSCI India Total Return Index. ETFs typically hold shares of stock of the underlying constituents of the various indices that they are designed to follow. An ETN, on the other hand, is an issued security that the issuer promises will track the index. Accordingly, because no shares of the underlying index securities are held within the ETN, the owner of an ETN puts his or her faith in the issuer to maintain the appropriate value to track the designated index. Accordingly, the credit-worthiness of the issuer is a concern for anyone purchasing an ETN.

The Motley Fool published a gloom-and-doom article about this a few months ago. As usual, the Motley Fool's article was very superficial and did not really explain how the ETN's value is derived. I will admit that I am no expert on ETN, but I have to believe that Barclay's (the issuer of INP) hedges its risk through a combination of futures and/or options tied to the benchmark MSCI India Total Return Index.

Another ETF Information Website

I have previously written about ETFconnect.com, one of the most informative websites pertaining to Exchange Traded Funds (ETFs). I discovered another good ETF-related website that was mentioned in this weekend's edition of the Wall Street Journal. The website is XTF.com and is operated by XTF Global Asset Management LLC. The website contains various ETF screeners, peer rankings, and ratings.

Barclays Offers the Only Indian Stock Market ETF

I have previously written about India and how the best way to invest in the Indian stock market was through closed-end funds that invest directly in Indian stocks. India is one of the rapidly growing emerging markets and was dubbed a "BRIC" country in a widely-read 2003 Goldman Sachs report on emerging markets. In the Goldman Sachs report, Goldman projected the Indian ecomony to rapidly grow over the next 40 years at a rate far faster than the western world. The image below is from the Goldman Sach's report and illustrates the projected annual growth rates of the various BRIC countries. As one can see, India's growth rate over the next 40 years is prjected to be far stronger than that of the other BRIC countries.


Although there will undoubteld be hiccups in India's growth, the appreciation of stocks listed on its exchanges should generally correlate to the country's overall economic growth. India is an open democracy with a rapidly expanding population and is probably more politcally stable than the other BRIC countries, Russia, China, and Brazil.

I was pleased to recently discover that Barclays now offers the first Indian stock market ETF (Barclay's actually offers an ETN, not an ETF, as discussed here). Apparently this ETF went public in Deceomber 2006, but I only recently read about it. The name of the ETF is the iPATH MSCI India Index ETF (symbol: INP). It seeks to represent approximately 85% of the free-float-adjusted market capitalization of equity securities by industry group within India. As of March 31, 2007, the Index was comprised of 69 companies listed on the National Stock Exchange of India (the "NSE"). According to Barclays, the index had annual returns of 38.1% over the past five years (through April 30, 2007), 40.33% over the past three years, and 30.36% over the past year.

I am glad to see that someone is finally offering an Indian ETF. ETFs generally have much lower expense ratios than similar mutual funds or closed-end funds and are becoming more and more popular with investors. I will probably purchase some shares of INP the nest time I invest in the stock market, as this new ETF appears to be the best way for small investors to profit from the Indian stock market.

The First Russian Stock ETF Was Launched In April

I have written numerous posts about the Templeton Russia and Eastern Europe closed-end fund (symbol: TRF). I picked it for my Model Portfolio back in December 2005 because it was, at the time, by far the best investment vehicle for U.S. investors to invest in Russia stocks.

I posted back in March that TRF was performing poorly despite the solid performance of the Russian stock market. This underperformance was due to premium compression of TRF's share price relative to its underlying Net Asset Value ("NAV"), which plummeted from a premium of 38.07% at the start of 2007 to a mere 2.73% as of May 2, 2007.

The reason for this premium compression was perplexing and I could not determine a suitable explanation for it. Today, however, I finally found the cause of the compression - the first Russian stock market Exchange Traded Fund ("ETF") was announced earlier in the year. The Market Vectors Russia ETF (symbol: RSX) began trading on Monday, April 30, 2007, on the New York Stock Exchange. (A fact sheet is available at the Van Eck Global website.) TRF finally has a viable competitor in the form of RSX.

RSX tracks the performance of the DAXglobal Russia+ Index, a basket created by the Deutsche Bourse of the 30 most heavily traded Russian companies. Five of the stocks are listed in the U.S. as American depositary receipts (ADRs), 19 trade in London as global depositary Receipts (GDRs) and six trade on Russia's Micex Exchange.

The First BRIC ETF Was Launched In September

In 2003 Goldman Sachs published a report on the top emerging markets for the next 50 years - Brazil, Russia, India, and China (collectively known as "BRIC"). In the report Goldman Sachs projected that the BRIC countries will grow much faster than any of the current developed markets (including the U.S., Japan, Germany, the U.K., Italy, and France) and the local currencies of the BRIC countries will appreciate some 100-300% against those of the developed markets.

I have been waiting for an ETF to be introduced that invests only in the BRIC countries. Unfortunately there was none until very recently. The best that a small investor could do was to purchase a broad-based emerging markets ETF such as the iShares MSCI Emerging Markets Index Fund ("EEM") that invests in the BRIC countries as well as many other countries, including South Korea and Taiwan. Alternatively, one could also invest in country-specific ETFs and closed-end funds, such as the iShares MSCI Brazil Index Fund ("EWZ"), iShares FTSE/Xinhua China 25 Index Fund ("FXI"), Templeton Russia & East European Fund ("TRF"), and Morgan Stanley India Investment Fund ("IIF").

Luckily, the first BRIC ETF has finally been introduced. During mid-September 2006, the Claymore BRIC ETF was unveiled. The Claymore BRIC ETF invests solely in the BRIC countries and tracks the Bank of New York's BRIC Select ADR Index. Unfortunately, the BRIC ETF does not invest evenly in the BRIC countries - about 48% of the assets are in Brazil, 31% in China, close to 14% in India, but just 6% in Russia. Moreover, the ETF's assets are highly concentrated among a handful of stocks - the ETF owns both common and preferred shares of the Brazilian company Petroleo Brasileiro (symbol: PBR) totaling 15.53% of the ETF's net assets.

Although I am glad to finally see a BRIC ETF, I'm going to sit on the sidelines. I don't like the uneven investment in the BRIC countries, with the investment in Brazilian companies being nearly eight times as large as the investment in Russian stocks. For the time being, I will continue to invest in EEM and the country-specific ETFs and country-specific closed-end funds I listed above.

The SPDR Financial components (XLF) Is Paying A Quarterly Dividend On October 31, 2006

The SPDR Financial components (symbol: XLF) is paying a quarterly dividend of $0.1938 per share on October 31, 2006. It is often difficult to find much information about upcoming dividends for XLF. However, I was able to discover the relevant information by viewing the ETF information available at Amex.com.

The Nasdaq 100 ETF (QQQQ) Is Paying A Quarterly Dividend On July 31, 2006

The Nasdaq 100 ETF (symbol: QQQQ) is paying a dividend of $0.0257 per share on July 31, 2006. This dividend is being paid to shareholders of record as of June 20, 2006.

As with QQQQ's previous distribution in April 2006, it took me awhile to find the actual distribution date of this dividend. Yahoo Finance had indicated that the dividend was declared on June 16, 2006, but it did not list when the payout date would be. I was finally able to determine the payout date after some searching on Google and finding this article.

The iShares Silver ETF Was Launched Today

The first silver-based ETF was launched today by Barclays Global Investors. The name of the ETF is the iShares Silver Trust and its ticker symbol is SLV. Each share of SLV will initially represent 10 ounces of silver and opened at $129/share on the AMEX today. For almost all investors, SLV provides the cheapest means of buying and selling silver.

TheStreet.Com article about SLV

Some ETFs Are Very Difficult To Sell Short Due To A Shortage Of Available Shares

Smartmoney.com has an interesting article about shorting ETFs. The focus of the article is that despite the ETF industry's claims that one of the major benefits of ETFs is their ability to be sold short, many brokers are unable to actually sell shares of some of the ETFs short due to a shortage of available shares.

As I mentioned in a previous post, to sell shares short, one's broker has to borrow the shares from some other party who has a long position on the shares (usually another broker). Unfortunately, if no shares are available for borrowing, then it is not be possible to sell short any shares. This is disconcerting because on of the strategies I intend to implement in the future is a long-short arbitrage strategy (I have already tested such a strategy, as discussed here and here) where I sell short shares of a first ETF and use the proceeds of the short sale to purchase a long posiiton of a second, and different, ETF I think will outperform the first ETF.

The Nasdaq 100 ETF (QQQQ) Is Paying A Quarterly Dividend On April 28, 2006

The Nasdaq 100 ETF (symbol: QQQQ) is paying a dividend of $0.0291 per share on April 28, 2006. This dividend is being paid to shareholders of record as of March 21, 2006.

It took me awhile to find the actual distribution date of this dividend. Yahoo Finance had indicated that the dividend was declared on Marh 17, 2006, but it did not list when the payout date would be. I was finally able to determine the payout date after some searching on google and finding this article.

The Nasdaq 100 ETF Can Now Be Purchased Without Paying A Commission

Nasdaq Global Funds has instituted an investment program entited "QQQDirect" which allows individual investors to directly purchase shares of the Nasdaq 100 index tracking ETF, QQQQ. To sign up for this program, go to this website: http://qqqdirect.com/. According to the Nasdaq Global Funds, participants will be able to purchase shares of QQQQ once a month without having to pay any commissions. The minimum monthly investment is $10, and additional purchases will be either $3.99 or less if the participant signs up for a pre-selected investment program. The great thing about this is that there are no account setup, minimum balance, or inactivity fees. The main applicable fee is a $12.99 commission to be paid when the participant sells shares through the plan.

I think this is a great program for small investors who want to invest in QQQQ via dollar-cost averaging. Hopefully the S&P 500 (symbol: SPY) or S&P Midcap (symbol: MDY) ETFs will follow suit with similar plans.

Websites with good historical information on ETFs and Indicies

Over the past few years I've found that that Yahoo! Finance provides a lot of historical information about mutual funds and stocks that is very valuable when deciding whether to invest money in mutual funds or stocks. However, the current and historical information for ETFs listed at Yahoo! Finance is seriously deficient. For example, Yahoo Finance! often fails to list P/E information for ETFs and does not list actual calender year returns for any ETFs.

I did some sleuthing on Google and found the following good resources of ETF information:

(1) ETFConnect.com - this website contains a treasure trove of data for ETFs and closed-end funds, including historical returns, P/E ratios, top holdings, etc.

(2) Amex.com - this website for the American Stock Exchange (the "AMEX") also contains quite a bit of current and historical data for ETFs, including historical returns, P/E ratios, and recent dividend payouts

(3) Barra.com - this website contains historical fundamental data for a variety of S&P and Barra indicies, many of which are tracked by corresponding ETFs. For example, this website includes historical monthly fundamental data, including P/E ratios, for the S&P 500 dating back to 1976.

(4) Index Universe - this website contains lots of historical data for various ETFs and indicies.

The MSCI EAFE index is the "S&P 500" of foreign stocks

ETFs and mutual funds investing in foreign stocks have become increasing popular over the past 3 years or so. For example, the iShares Morgan Stanley Capital International, Inc. ("MSCI") Europe, Australasia Far East ("EAFE") index ETF (symbol: EFA) has attracted some $20 billion+ in assets in just a few years, while the MSCI Emerging Markets index ETF (symbol: EEM) has attracted around $7 billion in assets since its inception in April 2003.

The MSCI EAFE index is the less volatile of the two. The MSCI EAFE index tracks the stocks of foreign developed markets. Accordingly, these stocks should be less succeptible than emerging markets stocks to currency devauations, lawlessness, etc.

Its assets are divided between a number of European, Asian, and Australian stocks. As of the end of June 2005, close to 25% of its assets were invested in UK stocks, 21% were invested in Japanese stocks, 9% were in French stocks, close to 7% were in German stocks, another 7% were in Swiss stocks, and close to 6% were in Australian stocks.

The MSCI EAFE index has slightly outperformed the S&P 500 over the past 10 years, returning about 1% more annually over the past 10 years. We've been hearing much about the inevitable decline of the U.S. dollar relative to foreign currencies lately. In the event that does eventually happen, there's a strong likelihood that foreign stocks will outperform domestic ones. Accoridngly, an ETF or mutual fund tracking the MSCI EAFE index is a good addition to an investor's portfolio.

For those who enjoy dollar-cost-averaging, ETFs may not be the best investment vehicle, seeing as how commissions must be paid to acquire the shares on a stock market exchange. Luckily, however, Vanguard offers a low-cost index fund, the Vanguard Developed Markets Index fund, that tracks this index. The Vanguard fund has a low expense ratio of about .29%.

Closed-end funds are the best way for the common man to invest in Russia and India

There's been a lot of talk over the past few years about the benefits of investing in Exchange Traded Funds ("ETFs"). Financial writers and advisors tout their tax efficiency, low cost, and instant diversification as several reasons to buy.

Unfortunately, there are a number of market segments for which no good ETFs currently exist. Those include some emerging foreign markets such as Russia and India. Both Russia and India are supposed to be two of the fastest growing economies over the next several decades. It would be nice if there was an ETF that would invest in stocks in each of these countries. Unfortunately, acording to ETFconnect, there is no such ETF right now. However, there are a couple closed-end funds investing in each of these markets.

The best Russian stock market closed-end fund that I've found is the Templeton Russia and East European Fund (ticker symbol: TRF). This fund has been around since 1995 and returned an annualized 20.10% for the 10-year period ending on 10/31/05. However, this fund is not for the faint of heart - although it has had huge gains, such as in 1999 when it gained 133.57%, it has also had huge losses, such as in 1998 when it lost 74.65% when Russia had a currency crisis.

The best Indian stock market closed-end fund that I've found is the Morgan Stanley India Investment Fund (ticker symbol: IIF). This fund has been around since 1994 and returned an annualized 19.09% for the 10-year period ending on 10/31/05. However, this fund is also very volatile - it returned 144% in 1999 after losing 11% and 14% in 1997 and 1998, respectively.

As with all closed-end funds, these do charge higher fees than most ETFs - usually over 1% of assests. Moreover, closed-end fund can also trade at a discount to their underlying net asset values.

***Update - August 7, 2007***
Since I wrote this article back in 2005, a low cost Russia stock market ETF and an India stock market ETN have been introduced. I discussed both the Russia stock market ETF and the India stock market ETN in 2007 posts.

Powershares has a wide assortment of interesting ETFs

I first heard about the Powershares brand of Exchange Traded Funds (ETFs) about a year ago. Powershares is an investment company that provides a wide assortment of ETFs that track various segments of the stock market and attempt to beat their peer ETFs and mutual funds.

Most of their ETFs track various "Intellidex" indicies. Intellidex indicies track market segments such as Small Cap Value, OTC stocks, and the market as a whole. Powershares doesn't divulge the intellidex parameters, but it does publish a list of the stocks in each of their ETFs on the Powershares website.

My personal favorites are the SmallCap Value, OTC, and Dynamic Market ETFs. Accordingly to Powershares, the SmallCap Value Intellidex has returned 19.49% annually over the past 10 years and 24.18% annually over the past 5 years. The website indicates that the intellidex for the Dynamic Market ETF (which is designed to beat the S&P 500) has returned 15.26% annually over the past 10 years and 9.04% annually over the past 5 years. The website further indicates that intellidex for the Dynamic OTC ETF (which attempts to beat the Nasdaq composite) has returned 16.45% annually over the past 10 years and 1% annually over the past 5 years.