Best VIX ETF to Invest in Right Now – Beginners Guide 2021
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Investing in an ETF has always been thought of as safe and even tedious, but that’s not to say they don’t have their advantages, and for many people, they’re likely the best option to invest in. On the other hand, may just be what you’re looking for if you’re searching for something with somewhat better returns than a standard blue-chip ETF. You can gain from market volatility by investing in a VIX ETF. Monitoring market volatility is one thing. However, investors might benefit from investing in assets that track the VIX’s value. The VIX, or Volatility Index, measures volatility in the S&P 500 and is commonly referred to as the market’s “fear gauge.” You can bet on whether market volatility will rise or fall using a VIX ETF.
Throughout this guide, you’ll learn how to invest in VIX ETFs as we review the best VIX ETF brokers and VIX ETFs.
Table of Contents
#1 Broker to Invest in VIX ETF – eToro
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How to Invest in a VIX ETF – Step by Step Guide 2021
We understand how tough it may be to begin investing on a new platform, so we’ve created this short and easy starting guide to make the process as painless as possible for our readers. If you’d like a more comprehensive guide with photos, scroll down to the bottom of the page.
- Step 1: Open an eToro account – You must first register with a broker before you can begin investing. If you’re not sure which broker is right for you, we recommend eToro. Simply type “eToro.com” into your browser, click “Join Now,” and fill in the relevant information.
- Step 2: Verify your Identity – Any reputable VIX ETF broker will ask you to verify your identity; it just takes a few minutes and is a typical industry standard. Only a photo ID (passport, driver’s license) and proof of address are required (bank statement, utility bill).
- Step 3: Fund your account – You’ll need to fund your eToro account once it’s been verified. It’s a simple process; simply click “Deposit Funds,” choose a payment method (credit/debit card, bank transfer, or e-wallet), input the amount you want to invest, and press deposit.
- Step 4: Invest in ETFs – Congratulations! You’re now ready to purchase a VIX ETF. Input “VIX” into eToro, select the appropriate choice, press invest, enter the amount you want to buy, and invest.
Where to Invest in an ETF – Top ETF Brokers
With all of the conflicting information about VIX ETFs that you’ve probably seen online, finding a genuine, reliable broker might be challenging. We’ve included in-depth assessments of the finest VIX ETF brokers in the UK to make our readers’ lives a little easier.
1. eToro – Best Overall VIX ETF Broker
It’s difficult to spend much time in the investment world without coming across eToro; the company has been active since 2007 and has over 20 million customers. They provide an excellent user-friendly investment platform with a broad range of investment options. Whatever level of trading experience you have, eToro is guaranteed to have something for you.
If you’re looking for a broker to buy VIX ETFs in the UK, we recommend eToro. This trading platform includes over 400 additional ETFs and 2,000 global stocks, as well as the finest ETFs from iPath and ProShares.
With eToro, trading VIX ETFs is entirely commission-free. You may also buy fractional shares of ETFs on eToro, allowing you to trade with as little as £40. There are tiny withdrawal and inactivity fees on the platform, but they are quite easy to avoid.
Security & Privacy
You don’t build a favorable reputation with more than 20 million clients by squandering their money. It’s clear that eToro takes security seriously; they’re regulated by the FCA and CySEC (both tier 1 regulators), so you won’t have to worry about your money or personal information being stolen. SSL encryption has been introduced to ensure that any sensitive information you’re needed to supply (passwords, banking details, etc.) is kept secure while being transmitted from your device to eToro’s servers.
Furthermore, eToro has provided all of its customers the option of using 2-factor authentication (which we strongly advise), which allows you to add an extra layer of security to your account and may one day save you from losing a huge sum of money.
Features
With over 20 million users, it’s understandable that eToro would require a diverse set of features to meet all of their needs. Despite this, eToro has done a good job of ensuring that no one is left out. Beginners can profit from eToro’s CopyTrading feature, which allows you to automatically duplicate the transactions of more experienced users, allowing a new user to generate a passive income without much work through investing.
CopyPortfolios, eToro’s means of offering users an effortless way to invest in various assets at once, is another handy option for newbies. Technical traders aren’t left out either; complex charting tools and a good choice of indicators are available to them. Overall, eToro has struck a good mix between beginner and expert investor options.
eToro Fees
| Fee Type | Fee Amount |
| Deposit Fee | $0 |
| Withdrawal Fee | $0 |
| Commission Fee | $0 |
| Inactivity Fee | $0 |
Pros:
- Two-factor authentication.
- Low fees.
- SSL encryption.
- User-friendly interface.
- Trade iPath and ProShares VIX ETFs
- 100% commission-free ETF trading
- Regulated by the FCA
- CopyTrading.
- CopyPortfolios.
Cons:
- Cannot trade VIX futures contracts directly
- Small withdrawal and inactivity fees
- Support for MetaTrader would be ideal.
- Additional indicators may be beneficial.
67% of retail investor accounts lose money when trading CFDs with this provider.
2. Capital.com – Premium VIX ETF Broker
For UK traders who desire flexibility, Capital.com is one of the top VIX ETF trading platforms. Popular VIX ETFs can be traded as CFDs through the broker. You can also utilize CFD trading to bet on the VIX’s price or futures trading to acquire any individual VIX futures contracts that are still available.
Capital.com offers 100 percent commission-free CFD trading, as well as some of the tightest spreads of any platform in the UK. Capital.com also provides no deposit or withdrawal fees, as well as no inactivity fees.
The broker provides a customized trading platform for online and mobile that includes everything a trader may possibly require. You can create your own watchlists, access hundreds of technical indicators, and keep an eye on the market with a bespoke news feed. Furthermore, Capital.com’s mobile trading app includes price alerts, allowing you to keep on top of market movements at all times.
Capital.com also uses artificial intelligence to improve your trading. The broker’s platform analyzes your trading patterns automatically to see what changes you may make to improve your win rate and reduce your losses. This is especially true for the active trading approach that VIX ETFs necessitate. Trading Platform at Capital.com
The Financial Conduct Authority of the United Kingdom (FCA) also regulates Capital.com. The broker provides excellent customer service 24 hours a day, seven days a week.
| Fee Type | Fee Amount |
| Deposit Fee | $0 |
| Withdrawal Fee | $0 |
| Commission Fee | $0 |
| Inactivity Fee | $0 |
Pros
- Trade VIX ETFs, spot CFDs, and futures
- 100% commission-free trading with low spreads
- Mobile trading app with price alerts
- 24/7 customer support
Cons
- No price alerts on the desktop app
- ETFs traded through CFDs only
76.72% of retail investor accounts lose money when trading spread bets and/or CFDs with this provider.
Invest in VIX ETFs – Broker Price Comparison
To give you an idea of how all the different platforms we’ve discussed compare against each other, we’ve included this easy-reference table.
| Broker | Commission | Deposit Fee | Withdrawal Fee | Inactivity Fee |
| eToro | 0% | £0 | £0 | £10 monthly (after 12 months of inactivity) |
| Capital.com | 0% | £0 | £0 | £0 |
What Is an Exchange-Traded Fund?
It might be difficult to appreciate the finer elements of ETFs if you are unfamiliar with all of the financial jargon being thrown around when people talk about them. Simply put, an ETF is a collection of assets that a fund has pooled together for investors.
Typically, the assets covered within an ETF are related, allowing investors to invest in a specific market while lowering their risk exposure.
Investing in an ETF is often best suited for people seeking steady, long-term growth, though a VIX ETF does come with an additional risk of volatility. You are not buying any underlying assets when you invest in an ETF, even though you may earn dividends (assuming the fund passes them on).
Best UK VIX ETFs to Invest In
For UK investors, there are four primary options, each of which works differently. We’ve done the research and prepared a list of the finest VIX ETFs you can invest in to help you understand the differences and decide which ETF is right for you.
Let’s look at the four best VIX ETFs (exchange-traded funds) and ETNs (exchange-traded notes) in the UK to see which one is ideal for you.
- iPath Series B S&P 500 VIX
With approximately $1 billion in assets under management, the iPath VIX Short-term Futures ETN (exchange-traded note) is the best fund for monitoring volatility in the S&P 500 index. The fund invests in a basket of futures contracts that show where investors expect the VIX to be in 1-2 months. So, while it may not perfectly mirror the VIX, it does convey near-term thinking about equities market volatility.
Importantly, the VXX fund holds these futures contracts on a daily rolling basis. Because the fund’s holdings fluctuate daily, this ETN should only be used for day trading. The fund has always produced a negative return over the long run.
The fund has a 0.89% expense ratio, which is quite high. However, because these are actively managed funds, that charge level is normal among the best VIX ETFs.
- ProShares Short VIX
The ProShares Short VIX ETF is an inverse exchange-traded fund (ETF) created for investors who predict market volatility will decrease rather than increase. The fund aims to mimic the half-inverse of the S&P 500 VIX Short-term Futures Index, which is the same index as the iPath Short-term Futures ETN (VXX). As a result, if volatility falls by half, the SVXY ETF’s value will increase by 25%.
The VIX futures contracts over the next 1-2 months are the focus of this investment. As a result, it does not necessarily mirror the VIX and does not reflect longer-term volatility thinking. The ProShares Short VIX ETF has an expense ratio of 0.95%.
- VelocityShares Daily Long VIX
A medium-term VIX ETF is required if you want to speculate on volatility over 6 months rather than 1-2 months. The VelocityShares Medium-term ETN comes in handy in this situation.
This ETN invests in VIX futures contracts with expiration dates ranging from 3-6 months. In particular, you can create a complicated hedging strategy for market volatility by combining bets in the VIIZ fund with trades in a short-term volatility fund. The VIIZ fund typically has an expense ratio of 0.89%.
- LHA Market State Alpha Seeker ETF
The LHA Market State Alpha Seeker ETF is a good option for traders and investors who wish to speculate on volatility without investing in the finest VIX ETFs. The fund aims to generate returns that are absolutely unrelated to stock market performance, and it accomplishes this by investing significantly in VIX ETFs.
The ProShares Short VIX Short-Term Futures ETF is the MSVX fund’s largest position. More than half of the fund’s value comes from the inverse VIX ETF.
The Market State Alpha Seeker ETF, unlike most VIX ETFs, does not compel you to abandon your investment daily. Instead, before holdings are rolled over, you can invest for up to three months at a time. As a result, it might be a stronger short-term gamble than a VIX ETF. The fund has an expense ratio of 1.16%.
Is Investing in a VIX ETF a Good Investment?
VIX ETFs can be a viable alternative investment, but they are best suited to experienced traders because of their complexity. Let’s look at some of the most important factors to consider when choosing whether VIX ETFs are good for you.
Daily Turnover
The most important thing for investors to know about VIX ETFs is that they are inappropriate for long-term investments. These monies are intended to be held for no more than one day. You would lose money every time you held a VIX ETF for a month or even a year.
This is due to the structure of VIX ETFs. At the start of each day, these funds purchase VIX futures contracts and closeout holdings at the end of the day. The fund is reset the next day with a new set of futures contracts.
This daily turnover ensures that the fund accurately tracks VIX’s investor sentiment every day. However, every time the fund resets, you will lose money since your positions will be closed, and lesser value positions will be reopened, causing you to lose money.
As a result, you must only utilize VIX ETFs for day trading. This indicates that active traders, rather than short or long-term investors, will benefit from these funds.
Expense Ratios
Another thing to keep in mind concerning VIX ETFs is that their expense ratios are typically very high. The management fee charged by a fund is known as the expense ratio. On an annual basis, the top VIX ETFs in the UK often charge roughly 1% or more (holding the fund for a single day will cost much less).
This is significant because it indicates that trading VIX ETFs has higher fees than trading index funds or tracker funds.
Hedging Strategies
While it is possible to profit from market volatility by trading VIX ETFs, many UK traders utilize VIX ETFs to hedge their positions. Holding a VIX ETF can help keep your portfolio afloat during a stock market meltdown because the VIX rises when stock prices fall. In fact, as part of a broader portfolio management approach, you might want to consider adding a VIX ETF.
If you’re not sure if a VIX ETF is good for you, get expert investment advice.
Investing in a VIX ETF – What are the Risks
One problem with VIX ETFs is that they are more correctly considered as a measure of “implied” volatility rather than actual volatility. VIX demonstrates how much investors are ready to roll out to be able to buy or sell the S&P 500 index because it is a weighted blend of the prices for different S&P 500 index options.
Aside from that, VIX ETFs are notorious for not accurately reflecting the VIX. For instance, one-month ETN proxies could only capture about 25% to 50% of daily VIX fluctuations, while midterm products performed remarkably worse. This is because VIX futures indexes are renowned for failing to replicate the VIX index.
Furthermore, because of the behaviour of the VIX futures curve, VIX ETF positions tend to decay over time. As this erosion occurs, these ETFs will have less money to roll over into new futures contracts as old ones expire over time. This vicious trend continues, causing most VIX ETFs to lose money in the long run.
How to Invest in a VIX ETF with eToro
Are you ready to invest in one of the finest VIX ETFs? We’ll show you how to start trading using eToro, which has no commissions, fractional shares, and an integrated social network.
Step 1: Open an account with eToro
The first step in any investment is to open an account with a reputable broker. Always trade on a regulated platform; otherwise, you’ll be stuck with little redress if something goes wrong. The FCA and the CySEC both regulate eToro, so you know you’re in safe hands. Simply put “eToro.com” into your browser’s search box, then click “Join Now” to complete the registration process.
Step 2: Verify your account
Because eToro is regulated, they are subject to regular audits and must adhere to stringent money laundering standards. This implies that before you invest with eToro, you’ll have to authenticate your identity (or any other reputable broker). Only a few documents are required, including a photo ID (passport, driver’s license) and proof of address (bank statement, utility bill).
Step 3: Fund your account
Before investing in a VIX ETF, the final step is to fund your eToro account, which you can do now that your account has been verified. Simply select the “Deposit Funds” option, input the amount you want to invest, then press “Deposit.” In the “Portfolio” area, you’ll be able to see your available funds. eToro accepts various payment methods, including credit/debit cards, bank transfers, and electronic wallets (Skrill, PayPal, etc.)
Step 4: Invest in a VIX ETF!
Wasn’t that a piece of cake? You can invest in a VIX ETF now that you’ve funded your eToro account. Fill “VIX” into the eToro search box, click on the applicable choice, press the blue “Invest” button, type in the amount you’d want to invest, and press “Invest.”
You can invest any sum larger than £40 on eToro because fractional shares are available. To go along with your order, you can choose a stop loss or take profit level.
To buy your first VIX ETF, click Open Position when you’re ready. Remember to sell at the end of the trading day to avoid incurring additional losses as the fund’s VIX futures contracts roll over.
Conclusion
Those interested in the VIX ETF market might consider investing for a day or less. Many of these assets are quite liquid, making them ideal for speculation. VIX ETFs are extremely risky, but they can be profitable if traded correctly.
After reading our guide, you’ll have all the information you need to choose the best VIX ETF, find the perfect broker, and get started investing.
If you’re still uncertain about which broker is best for you, we recommend eToro; their VIX ETF is a great place to start for new investors and provides straightforward access to the VIX and ETF markets.
Best Broker to Invest in VIX ETF – eToro
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FAQs
What is VIX?
Where can I Invest in a VIX ETF?
Why don’t VIX ETFs always track the VIX?
Why do VIX ETFs have negative returns?
What is an ETF?
Is an ETF Safe in the Long-Term?
