Comments on: Why search for individual stocks when we can ride the ultra ETF’s?

By: Verdacity

Verdacity — Sat, 08 May 2010 02:10:17 +0000

Dr. Wish, all leveraged ETFs are designed to 'outperform' in this way. They are reset every trading day, and replicate the underlying index 200% or 300% on a daily basis. If you do the math this way, you'll see that it adds up to your calculations. On the way down however, watch out, the math works against you (larger drawdowns than may be superficially apparent).

By: Shawn M

Shawn M — Tue, 04 Aug 2009 02:13:57 +0000

Another note about the long term performances of these ETFs: these leveraged ETFs do very well during steady trends, but during choppy market conditions you can end up with the bullish and bearish ultra ETFs both doing worse than the underlying index. For example, from the period of January to April, 2009 the 3x bull AND 3x bear financial ETFs were BOTH down over 60%! (link: http://bespokeinvest.typepad.com/bespoke/2009/04/direxion-3x-financial-etfs-go-certifiably-crazy.html )

By: Shawn M

Shawn M — Tue, 09 Jun 2009 14:05:09 +0000

RE: Jason. Yes that is the maximum amount unless you are close to retirement age (then it’s $1000 more).

By: Jason

Jason — Tue, 09 Jun 2009 00:32:53 +0000

dr wish, im glad your back and blogging again! is it true that the maximum annual contribution into a roth ira is $5000? i just opened an account at thinkorswim

By: Jim Tamarelli

Jim Tamarelli — Tue, 09 Jun 2009 00:06:12 +0000

Here’s a good article about leveraged ETF’s.
http://blog.quantumfading.com/2009/06/01/leveraged-decay/

By: bill kloppenburg

bill kloppenburg — Mon, 08 Jun 2009 14:14:43 +0000

If long-term under performance be accurate, a successful timing model ala Wishing Wealth or ??? would increase the net results in favor of the 2X/3X outperformance. I do wonder if the ratio would hold in a normalized market vs. the hugh jump seen since the March low? And how to determine the ultra ETF’s with the most potential?

By: Shawn M

Shawn M — Mon, 08 Jun 2009 14:12:13 +0000

Thanks for posting this. I remember in your stock class, you said that QLD outperformed a huge majority of stocks during the Fall 06 bull market rally. I think this is a good strategy for investors that are willing to take the time to study the market’s trend, but don’t have the time to spend looking at individual stocks.

By: Illini

Illini — Mon, 08 Jun 2009 04:42:25 +0000

You have a bull by its tail with your analysis. And with a 3 month comparison, you may be holding the end of the tail. Other studies I have seen said these devices under perform for the longer term.