Zacks.com featured expert Kevin Matras highlights: ProShares Ultra Health Care, ProShares Ultra Technology and ProShares Ultra Consumer Goods

CHICAGO--(BUSINESS WIRE)--Kevin Matras writes about ETFs and how to use them to make 2009 a great year. ETFs in this week’s article include ProShares Ultra Health Care (NYSE: RXL), ProShares Ultra Technology (NYSE: ROM) and ProShares Ultra Consumer Goods (NYSE: UGE). Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=109

Screen of the Week written by Kevin Matras of Zacks Investment Research:

There's been a lot of talk about Exchange Traded Funds (ETFs) lately in the media. Since it's a great tool for investing in the market, I thought I'd take some time and talk about them today.

First off, ETFs are essentially baskets of stocks that trade like an individual stock. ETFs were first introduced back in 1993 with the Standard and Poor's Deposit Receipts ETF, ticker symbol SPY. The 'Spider' (as it's often called) was designed to track the S&P 500, while offering the convenience and liquidity of a stock.

Since then, the number of ETFs and the kinds of ETFs available have grown tremendously. Now there are ETFs on the Dow Jones, newer ones of the S&P 500, ETFs on the Nasdaq and the different Russell Indexes.

In addition to that, there are also ETFs on different sectors and industries, such as Financials, Oil and Gas, Basic Materials and Consumer Goods. Also, Real Estate, Healthcare, Technology, Telecommunications, Utilities and more.

There are even ETFs on currencies and Treasuries, such as Gold, Silver and International Markets, etc.

But the innovation of the ETF business doesn't stop there.

In addition to making money on the ETFs as the price goes up (i.e. the market or industry goes up), investors can actually buy ETFs that will make money (rise in price) as the market or a specific industry falls. This is a great alternative to outright shorting stocks. Since shorting stocks requires a margin account, there are some who can't short because of the type of account they have while others simply don't want to. But many of these investors would still like a way to profit as prices go down.

And the short ETFs do just that.

Let's say you believed that the S&P 500 was going to go down. One of the easiest ways to trade this idea would be to buy (or go long) a short S&P 500 ETF, such as the ProShares Short S&P500 (SH).

A short ETF will correspond inversely (or opposite) to the daily changes in the S&P 500 index (before fees and expenses). For example: if the S&P 500 was down 3% one day, the short ETF that you bought would increase by 3%, giving you an easy way to profit from a market decline without any special setting up in your account. And since it trades like a stock, you can get in and out at any time during the market you want.

In addition to short (and long) index ETFs, there are also short (and long) sector and industry ETFs. Let's say you thought Financials were headed for another fall. You could buy a Short Financial ETF, such as ProShares Short Financials (SEF). This would correspond inversely to the daily price movement of the Dow Jones Financials Index, which holds companies such as JP Morgan, Bank of America, Citigroup, Goldman Sachs and more.

As those companies fall and the financial index goes down, your stock would increase in value commensurately.

Ultra ETFs

Ultra ETFs work the same way as regular ETFs except they correspond to twice the daily price movement on the underlying index or sector.

If you're exceptionally bullish on the Nasdaq for instance, you'd want to buy an Ultra (long) ETF, such as the ProShares Ultra QQQ (QLD). If the Nasdaq 100 went up 2%, the Ultra ETF QLD would go up by 4%.

If, on the other hand, you're exceptionally bearish or want to leverage your investment dollars to their fullest amount, you can buy an UltraShort ETF, such as ProShares Ultra Short QQQ (QID). This ETF correspond inversely to twice the daily price change in the underlying Nasdaq 100 Index. So a 5% decline in the Nasdaq 100 for example would equate to a 10% increase in your UltraShort Nasdaq ETF, QID.

These UltraShort ETFs are also available for the Dow Jones, the S&P 500, different market Cap and Style Indexes, as well as various Sectors and Industries. These types of products are ideal ways to make money if you believe stocks are headed for a fall. They are also great ways to hedge an existing portfolio. And with the extra leverage available with the Ultra ETFs, you won't have to tie up a lot of money to do so.

And of course, the Ultra ETFs are great ways to maximize your returns on the long side too. Even a small 5% or 10% rebound in the market could add up to a 10% or 20% gain.

But a word of caution: don't over-leverage yourself or put too much money into any one of these Ultra ETFs in an effort to try and make it all back, all at once. Get comfortable with seeing your position rise or fall twice as much as the underlying market or sector you're participating in. Sure, a 10% gain on a 5% down day for the market is exciting. But a 10% loss on a 5% up day for the market may push you out of your risk-to-reward comfort zone.

So take it slow and feel how it feels to have this additional leverage in your portfolio.

Sector ETFs

If you're going to be trading Sector or Industry ETFs, the Research Wizard makes it easy to determine which Sectors and Industries are poised to perform the best (or worst). With the Research Wizard, you can run a sector or industry screen to see which groups have the best average Zacks Rank. It's easy to do and you'll instantly know what the top Zacks Rank groups are.

This is important because in our testing we've found that the Zacks Rank is just as profitable at picking the best industries as it is in picking the best stocks. And this makes sense because an industry is nothing more than a group of stocks.

The top 50% of the Zacks X or Expanded Industries (those with the best Average Zacks Rank) significantly outperformed the bottom 50% (those with the worst average Zacks Rank) by a margin of nearly 4 to 1. The top 10% of industries showed the greatest outperformance of them all.

So before you make your next trade in the market with stocks, options or ETFs, do your research first and see what your chances of success are with the Research Wizard.

Three of the top Sectors and some Ultra ETFs to consider are listed below:

Medical – RXL (ProShares Ultra Health Care ETF)
Computer & Technology – ROM (ProShares Ultra Technology ETF)
Consumer Staples – UGE (ProShares Ultra Consumer Goods ETF)

Start learning how to select the top sectors and industries on your own in order to find the best stocks and ETFs to trade them. Sign up now for a free trial to the Research Wizard and start doing this today. Get ready for 2009 with the right tools and new ideas: http://at.zacks.com/?id=111

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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