Does Your Portfolio Need a New Foreign Policy?
If you invest in foreign markets, you know that they’ve been hot.
Emerging markets have outperformed the S&P 500® by more than 130% over the past three years.1 More established foreign markets have been rewarding as well, earning almost double the gain of the S&P 500® over the same period.2
But what if you believe foreign markets will cool off?
Now, there’s never been an easier way to do something about a possible decline in foreign equities. Short International ProShares are the first ETFs that allow you to get short exposure to foreign markets without the hassles—or expense—of a margin account. It’s as simple as buying a stock.
There are plenty of investment choices for investors who think foreign markets are growing. Until now, there haven’t been many choices if you think they’re headed in the other direction. Short International ProShares let you act on your beliefs about overvalued markets—something you can’t do with traditional international funds.
Seek profit in a foreign market downturn
Scenario: You think Japanese stocks are temporarily overvalued—and don’t want to just sit on the sidelines if there’s a pullback.
Potential solution: Participate—use the built-in short and magnified exposure of UltraShort MSCI Japan ProShares to seek profit if the MSCI Japan Index falls. For example, if you want $10,000 of short exposure to the MSCI Japan Index, you could acquire it by investing $5,000 in UltraShort MSCI Japan ProShares. It's important to remember that UltraShort ProShares may require you to make adjustments to your holdings to maintain a specific short exposure.
Attempt to hedge international holdings
Scenario: You’ve profited in recent years from international investments—and believe in their long-term prospects—but you’re concerned about a short-term correction in foreign markets. You want to protect your previous gains but prefer to avoid the potential tax consequences and transaction costs you may incur by selling your international holdings.
Potential solution: Use Short International ProShares to create a hedge, which may help protect your international investments in the short term. For instance, if your international holdings have a strong correlation to the MSCI EAFE Index, buy Short MSCI EAFE ProShares, which are designed to move in the opposite direction of the MSCI EAFE Index. Or consider UltraShort MSCI EAFE ProShares, which allow you to increase your hedge position with no additional investment. If the index declines, your hedge should help offset losses in your international investments.
Note that if the MSCI EAFE Index rises while you hold your ProShares position, your hedge will actually result in a loss. UltraShort ProShares may require you to make adjustments to your holdings to maintain a specific short exposure. Also, remember that ProShares have fees, expenses and tax consequences of their own.
Rebalance international exposure without selling holdings
Scenario: Your emerging market position has grown substantially and is now overweighted in your portfolio. You need to rebalance but don’t want the potential tax consequences and redemption fees of selling holdings.
Potential solution: Buy shares of Short MSCI Emerging Markets ProShares or UltraShort MSCI Emerging Markets ProShares to reduce your exposure to the overweighted position, without selling profitable investments.
Find out more about how Short International ProShares can be used to pursue return-enhancing, risk-reducing investment strategies. Call your financial adviser or broker today.
ProShares entail certain risks, including, in some or all cases, aggressive investment techniques, inverse correlation, leverage, market price variance and short sale risks, all of which can increase volatility and decrease performance. In addition to the normal risks associated with investing, international investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Securities focusing on a single country may be subject to higher volatility. ProShares are not diversified investments, and narrowly focused investments typically exhibit higher volatility and may be more susceptible to single-issuer risk than a more diversified fund. This information is not intended as tax advice. Please consult your tax adviser or financial adviser for tax advice based on your particular situation.
Carefully consider the investment objectives, risks, and charges and expenses of ProShares before investing. This and other information can be found in their prospectuses. Read the prospectus carefully before investing. For a ProShares prospectus, please download it now and seek advice from your financial adviser or broker dealer representative. Financial professionals can call ProShares
at 866-PRO-5125.
1 From September 30, 2004 to September 28, 2007, the MSCI Emerging Markets Index gained 179.27% and the S&P 500 Index gained 44.81%. Source: Bloomberg.
2 From September 30, 2004 to September 28, 2007, the MSCI EAFE Index gained 87.17% and the S&P 500 Index gained 44.81%. Source: Bloomberg.
MSCI, Morgan Stanley Capital International and MSCI Index are servicemarks of MSCI. FTSE/Xinhua China 25 is a trademark of FTSE/Xinhua Index Limited ("FXI"). All have been licensed for use by ProShares. "FTSE®" is a trademark of the London Stock Exchange PLC and The Financial Times Limited and is used by FXI under license. "Xinhua®" is a trademark of Xinhua Finance Limited and is used by FXI under license. ProShares have not been passed on by these entities or their affiliates as to their legality or suitability. ProShares are not sponsored, endorsed, sold or promoted by these entities or their affiliates, and they make no representation regarding the advisability of investing in these products. THESE ENTITIES AND THEIR AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.