Unbeknownst to many, there are stocks in the market today that are engines of capital destruction.
The securities have caused pain to countless investors before, and will likely cause pain to countless investors hence.
Although there are no sure things, the stocks will likely make you a millionaire … if you are a billionaire.
While these stocks are infamous, the goal of this article is to educate. Please don’t short stocks due to this article. Shorting is very risky and should not be done by almost all people due to the unexpected risks. Also realize that the securities mentioned are only likely to under-perform in the long term (> 10 years) and that anything can happen in the short and medium terms. The stocks could actually be good investments on some timelines.
Now that the introduction is out of the way, let’s expose the infamous four:
#4 iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX)
Going long volatility for the long term isn’t a good bet. Take a look at iPath S&P 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX)’s performance over 10 years, and it’s like Chinese Water Torture. Even when it goes up, it’ll eventually go down and down and down.
VXX in the long term is a bad investment because volatility has historically been mean reverting, and it’s mathematically impossible for volatility to continue to go up meaningfully every day indefinitely. In addition, the VXX also suffers from contango at times — a double whammy.
VXX is dangerous to short, however, because when unexpected things happen — and those events will happen — volatility can surge and cause the VXX shorters a lot of pain and lose their shirts.