If there's one thing that should bug retail investors, it's ETF splits, which cater to traders, Chris Dieterich of Barrons
writes. ProShares created splits in 15 funds, such as a 1-for-10 reverse split in the Russell investments'[profile] ProShares Ultra VIX Short-Term Futures
ETF. It was the second time in a year that the ETF had been split.
Even simple stock funds conduct splits, mostly because it is tracking an underperforming market segment. Van Eeck's[profile] Market Vectors Rare Earth/Strategic Metals
ETF fell 28 percent this year, which underwent a reverse split.
Splits are not advantageous for long-term investors because exchanges can't trade in fractions of shares, Dieterich writes. Investors who own shares in say, three, four or 10, have excess shares redeemed in cash. For investors, that means unplanned gains and losses; tax events they can't plan for.
Morningstar analyst Abby Woodham put it bluntly:
After all, she says, cost-conscious investors "should perhaps not be playing with these ETFs to begin with."
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