I use them, but sparingly based on the information provided. I did buy a 2x etf that was discounted 99% in March last year. It has since doubled in value so I’m sticking with it.
ndx 10 year cumulative gain 683% (annualized 22.8%), Tqqq over same period 12,228% (annualized 62.9%), amazon stock rose about 71% in 2020, FNGU (triple leveraged fang etf) in the same period rose 352%, if you bought during the march dip then it's 905% in 1 year. 100k -> 1 mil in one year. There is also a triple leveraged tesla only etf 3LTS, given how much tesla has rose. I don't think I need to spell out how much it gain over the same period. I'm not saying bet the farm on it, but the risk/reward ratio is certainly looking favorable for a small speculative position. Especially if you know how to use trailing stop loss to buy and sell instead of just holding it forever like some one is pointing a gun to your head.
What happens if I invest $100 in a 4x leveraged ETF and the underlying drops by 40%? Is my position liquidated and closed? Or does it go into negative but position is kept open?
Thanks for the video. I’ve been wondering about this topic for a while. It is amazing what a difference the expense ratios make. I do wonder how much DCA could mitigate start date sensitivity.
Glad it was helpful! As far as DCA and start date sensitivity go it wouldn't have any effect on the start date sensitivity figure (i.e. if the total SDS was 93% for an investment it would remain 93% regardless of whether you were adding money to the fund over time or not), but it would obviously increase your ending net worth. The reason for this is start date sensitivity is concerned with the returns of an investment (as opposed to the investor) from different starting points and (unless you're investing an incredibly large amount of money or trading in an incredibly small fund) those returns don't change much whether or not you are actively adding to the nest egg. Though if you're DCA a large enough proportion of your net worth each year it could serve to mitigate some of the risks in the short-term (until the nest egg becomes so large that your ongoing investments make up a relatively small portion of the growth each year). Hope this makes sense!
in a downturn the vix goes through the roof making it unpractical to buy options. 3x's etc come in handy just for this situation. with zero commission ya can buy a share or 2 for all the big index's and wait for the market to finally turn. I would not use a huge amount of money doing this but it definitely works especially if you can wait a bit before buying, not right away as the market turns south.
They are viable long term. Just have to do some risk management. I currently use a trailing stop loss order of 15%, DCA back into it and move my full amount back in after the price crosses above the 50 day EMA.
This only really works if you pair them with other leveraged ETFs or assets that are negatively correlated and uncorrelated, and stick with the most liquid of these funds.
I guess it's because it is already difficult to multiply the index daily return. Trying to mirror ANNUAL returns it is absolutely impossible, since compounding and volatility deviate returns over such long periods of time.
Off topic question but I'm leaving it on your latest video so that you can see it. My employer provides a Roth 401(k) with a 5% match. I'm putting 15% of my income with a plan to raise it to 20% with my next raise. Question, rather than do that, is there any sense in opening my own Roth IRA that I know I can max out and only get the match from my employer? Possibly go to 6 or 7% with the 401? Or should I just put everything in the 401 since they'd both be Roth anyway? Thanks...
You could do either and be fine. Many investors start with the 401K and go up until they got the full employer match then switch to their Roth IRA until it is maxed out for the year. After that, if they have additional funds that they wish to invest they will return to the 401K. It's a pretty common strategy. One thing to note is that in most cases you will have more investment options in an IRA than a 401K (which often have limited funds to choose from). So if that's something that you're feeling limited by in your 401K making the move to the IRA after getting the full match may be the better option. Thanks for the question!
Lack of required minimum distributions make roth iras extremely desirable if one can afford to fully fund them after getting their employer's maximum match for the employer sponsored plan
It is usually recommended to max employer match, then Roth IRA, and then Traditional IRA. First is instant 100% return, second is tax free gains when it has grown big, and last is putting much in before taxes so you can get more in at the start of investing.
If combined with other ETFs, leveraged ETFs might be reasonable buy and hold strategy. Eg: 20% TMF 80% VTI which would have 10% max drawdown and 7% std dev
If there was no tracking error (or any similar errors that caused TQQQ to not return precisely 3x QQQ daily return), then in theory, yes. Though it should be noted that a drop in one day of that magnitude is highly unlikely (given that QQQ's largest single day drop since 1999 is a mere 12% and the fact that most markets nowadays are supposed to shut down for the day if they fall by more than 20%).
I have been trading the TNA/TZA pair for 10 years now with great results! They are my largest position and are the main reason (along with zero commission) I was able to quit my full time job. The key is most people play just one side when in fact you have to be like the Rothchilds and play both sides. If you can get the swing of it you can make consistent income
Sorry but you just really don’t know what you’re talking about release can’t explain it very well because a leveraged ETF means that money was borrowed and then that money has to be paid back I need an address any of those issues
This is a very poorly done video even if the concepts are sound. You are throwing out way too much information and racing through the voice track too fast for the viewer to absorb. The visuals are cleverly done but don't add much to comprehension. No like and no subscription for you.
yeah, leveraged trading (margin trading) is usually more of a day trading strategy than a long term hold. You buy in when the market is oversold and sell at overbought on the same day.
I use them, but sparingly based on the information provided. I did buy a 2x etf that was discounted 99% in March last year. It has since doubled in value so I’m sticking with it.
That's awesome, Cato! Yes, the leveraged funds can be pretty great during rallies :)
ndx 10 year cumulative gain 683% (annualized 22.8%), Tqqq over same period 12,228% (annualized 62.9%), amazon stock rose about 71% in 2020, FNGU (triple leveraged fang etf) in the same period rose 352%, if you bought during the march dip then it's 905% in 1 year. 100k -> 1 mil in one year. There is also a triple leveraged tesla only etf 3LTS, given how much tesla has rose. I don't think I need to spell out how much it gain over the same period. I'm not saying bet the farm on it, but the risk/reward ratio is certainly looking favorable for a small speculative position. Especially if you know how to use trailing stop loss to buy and sell instead of just holding it forever like some one is pointing a gun to your head.
What happens if I invest $100 in a 4x leveraged ETF and the underlying drops by 40%? Is my position liquidated and closed? Or does it go into negative but position is kept open?
Great content my man!! Keep it up!!
Thanks! Will do!
I Bought TQQQ around the time of this video, Currently up 80%, Not complaining or selling.
Good job.
How about now ? Looks to me like you're back where you started.
@@chrisf1600he is good now 😂
When on sale but more
I've used leverage etfs in the past, I usually stay away now, mostly because that suits my personality
I can totally understand that!
Black Vito! You've got some great info! I see a lot of your comments on on this channel along with David Ramsey's channel. 👍🤙
Thanks for the video. I’ve been wondering about this topic for a while. It is amazing what a difference the expense ratios make. I do wonder how much DCA could mitigate start date sensitivity.
Glad it was helpful! As far as DCA and start date sensitivity go it wouldn't have any effect on the start date sensitivity figure (i.e. if the total SDS was 93% for an investment it would remain 93% regardless of whether you were adding money to the fund over time or not), but it would obviously increase your ending net worth.
The reason for this is start date sensitivity is concerned with the returns of an investment (as opposed to the investor) from different starting points and (unless you're investing an incredibly large amount of money or trading in an incredibly small fund) those returns don't change much whether or not you are actively adding to the nest egg. Though if you're DCA a large enough proportion of your net worth each year it could serve to mitigate some of the risks in the short-term (until the nest egg becomes so large that your ongoing investments make up a relatively small portion of the growth each year). Hope this makes sense!
Thanks. Very helpful info in this video.
Glad it was helpful!
Fantastic video man, answered so many of the questions I had around this.
Glad to hear it!
You have a weighted die. 2 and 5 should be on opposite sides (just like 6 is paired with 1, and 3 with 4).
Yes can you die?
Can you do a video on SQQQ? That would be awesome!😎
In case the leveraged ETF crashes to zero, do you have to pay extra for dept or did you "just" lose all your money? What is the mechanism there?
very very useful. thank you and congratulations for the channel
You're welcome 🙂
DCA in Leveraged after a downturn.....worth a try.
in a downturn the vix goes through the roof making it unpractical to buy options. 3x's etc come in handy just for this situation. with zero commission ya can buy a share or 2 for all the big index's and wait for the market to finally turn. I would not use a huge amount of money doing this but it definitely works especially if you can wait a bit before buying, not right away as the market turns south.
They are viable long term. Just have to do some risk management. I currently use a trailing stop loss order of 15%, DCA back into it and move my full amount back in after the price crosses above the 50 day EMA.
This is the best video I've seen on the topic, specifically comparing VOO to SSO ROI adjusted. Thanks.
Glad you enjoyed it!
This only really works if you pair them with other leveraged ETFs or assets that are negatively correlated and uncorrelated, and stick with the most liquid of these funds.
That was Hedgefundie's strategy with 20 year 3x Bull Treasuries ETF.
Someone should definitely create a leveraged Growth ETF because it would be the most negatively correlated with higher bond yields.
Great content
Thanks!
You put the DEEP in Deepdive 😮
I wonder why there are no leveraged ETFs with annual or monthly reset.
I guess it's because it is already difficult to multiply the index daily return. Trying to mirror ANNUAL returns it is absolutely impossible, since compounding and volatility deviate returns over such long periods of time.
The whole calculation changes completely when you average cost into the leveraged ETFs
It does tend to shift the narrative a bit, yes :)
Off topic question but I'm leaving it on your latest video so that you can see it.
My employer provides a Roth 401(k) with a 5% match. I'm putting 15% of my income with a plan to raise it to 20% with my next raise. Question, rather than do that, is there any sense in opening my own Roth IRA that I know I can max out and only get the match from my employer? Possibly go to 6 or 7% with the 401? Or should I just put everything in the 401 since they'd both be Roth anyway? Thanks...
You could do either and be fine. Many investors start with the 401K and go up until they got the full employer match then switch to their Roth IRA until it is maxed out for the year. After that, if they have additional funds that they wish to invest they will return to the 401K. It's a pretty common strategy.
One thing to note is that in most cases you will have more investment options in an IRA than a 401K (which often have limited funds to choose from). So if that's something that you're feeling limited by in your 401K making the move to the IRA after getting the full match may be the better option.
Thanks for the question!
Lack of required minimum distributions make roth iras extremely desirable if one can afford to fully fund them after getting their employer's maximum match for the employer sponsored plan
It is usually recommended to max employer match, then Roth IRA, and then Traditional IRA. First is instant 100% return, second is tax free gains when it has grown big, and last is putting much in before taxes so you can get more in at the start of investing.
If combined with other ETFs, leveraged ETFs might be reasonable buy and hold strategy. Eg: 20% TMF 80% VTI which would have 10% max drawdown and 7% std dev
I have a question: Could a leveraged ETF fall to zero?
For example if QQQ falls 35% in one day, will the 3x TQQQ fall all the way to 0?
If there was no tracking error (or any similar errors that caused TQQQ to not return precisely 3x QQQ daily return), then in theory, yes.
Though it should be noted that a drop in one day of that magnitude is highly unlikely (given that QQQ's largest single day drop since 1999 is a mere 12% and the fact that most markets nowadays are supposed to shut down for the day if they fall by more than 20%).
Omg... why can't I click and figure out why likes or dislikes...you got 1...dis...why..I'd love for that perspective
I have been trading the TNA/TZA pair for 10 years now with great results! They are my largest position and are the main reason (along with zero commission) I was able to quit my full time job. The key is most people play just one side when in fact you have to be like the Rothchilds and play both sides. If you can get the swing of it you can make consistent income
Sorry but you just really don’t know what you’re talking about release can’t explain it very well because a leveraged ETF means that money was borrowed and then that money has to be paid back I need an address any of those issues
Viable? Yes. Practical? No.
For the majority of investors I'd have to agree!
This is a very poorly done video even if the concepts are sound. You are throwing out way too much information and racing through the voice track too fast for the viewer to absorb. The visuals are cleverly done but don't add much to comprehension. No like and no subscription for you.
Visuals provided not useful in comprehension, exactly.
I don't think so. The market will always crash at some point.
yeah, leveraged trading (margin trading) is usually more of a day trading strategy than a long term hold. You buy in when the market is oversold and sell at overbought on the same day.
Too much talking not simplified at all