SMHB Profile
The ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN is engineered to offer investors leveraged exposure to a portfolio of small-cap U.S. equities that provide high dividend yields. The underlying index includes 100 relatively small capitalization securities selected from a pool of U.S.-listed equities based on their dividend yield and other qualifying criteria. This selection process aims to capture the performance of smaller companies that are known for paying substantial dividends.
This exchange-traded note (ETN) employs a two-times leverage strategy, meaning it seeks to deliver twice the daily performance of the index, whether that performance is positive or negative. The leverage is applied to the compounded monthly performance of the index, which amplifies both potential gains and losses. The ETN’s leverage factor aims to enhance returns based on the index’s performance, but it also introduces increased risk and volatility compared to non-leveraged investments.
The fund’s focus on small-cap, high-dividend-paying stocks allows investors to target growth potential within the small-cap segment of the equity market while capturing income through dividends. Small-cap stocks, often characterized by their growth potential, may offer significant returns compared to their larger counterparts. However, they also tend to exhibit greater volatility, which can be exacerbated by the fund's leverage.
Investors should be aware that while the leveraged strategy can amplify gains in a rising market, it also magnifies losses during downturns. The compounded monthly adjustment of the leverage can result in substantial deviations from the performance of the index over longer periods. Therefore, the ETRACS 2xMonthly Pay Leveraged US Small Cap High Dividend ETN is suited for investors with a high risk tolerance who are seeking enhanced exposure to high-yielding small-cap equities with the potential for higher returns.
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