Beware Short & Leveraged ETFs

I have been considering investing an amount into a commodity ETF (HOGS), and was thinking about ETF Securities leveraged ETF.  However, I’ve now changed my mind after reading this post.

ETF Securities’ short commodities funds, like their leveraged funds, are defined in a way which obliges them to mechanically buy into strength and sell into weakness, eroding returns over time. 

The example given that illustrates the point:

 As a concrete example, if the index were to move from 10000 to 8000 (a change of -20%) on day 1 and move back from 8000 to 10000 (+25%) on day 2, the fund’s objective would require the fund unit value to move from say 10000 to 12000 (+20%) on day 1, and then fall from 12000 to 9000 (-25%) on day 2. The index has no net change over the two days but the fund has lost 10%.

I now think that if I do invest in any commodity ETF’s then I’ll most likely not use the leveraged/short funds, or at least do my research before doing so.