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Leaveraged ETFs reset every day. I did read some analysis a while back that showed how this means a buy and hold strategy for leaveraged ETFs fails to match regular ETF returns.
Essentially an annual 10% Rate of return for sp500 does not imply a 100% rate of return of 10x ETF.
Chief
There is a lot of incorrect information here…
You don’t even have to do any fancy math. There’s truth in that leveraged funds have some degree of decay.
But just looking at 5Y return my NASDAQ is at about 190% and my TQQQ is at ~1,300% return…
So yes a leveraged ETF will give you better returns unless the market is flat or down. So in long term leveraged ETFs win
Perhaps what A1 said my brother truer. Getting leverage on a normal ETF may be better than buying a leveraged ETF (provided you have enough capital to cover any margin call you get)
Hello fellow 3x’er
Levered etfs are often not intended to be held over night such as SPXL
You’d probably be better slapping on some real leverage aka a loan
More like a deep OTM weekly on SPY purchased Thu afternoon at 3:59pm ET…
In reality, options on a 3x leveraged ETF are no different than an option on a regular ETF.
Because when the market falls 10% or 20% or more and you lose a multiple of that you're gonna sell in a panic.
Maybe live thru one bear market first.
Leveraged etfs don’t work the same as leverage and aren’t generally ideal for long-term holding. You’re probably better off taking on margin.
More generally, efficient market hypothesis misleads people. Taking on higher risk (e.g. through leverage) increases expected (ie average) returns, but also increases probability of losing it all. No free lunches
Research has found that a portfolio with leveraged stock index holdings and bond index holdings provides the best risk adjusted return. Something like a 1.5x 60/40 allocation. Differences are very small though and it’s probably splitting academic hairs relative to the classic 90/10 or 95/5 allocation for an early 20s long term investor
You can also buy ITM, long-timeframe, LEAPs in addition to using margin to increase leverage but are risking loss if the market doesn’t go up over that timeframe
This 100%
TQQQ and UPRO. The people telling you about volatility decay can enjoy their BND returns while you lap their portfolio. Go get that money.
Fuck yeah #levertfup
I was just thinking about potentially doing this. TQQQ is up 105% over 1 yr and 1422% over 5 years. So why would leveraged indexes not beat regular indexes in the long run? Genuine question - I know I likely am missing something.
Of course if market drops 5% in one day, TQQQ could drop 15%. So obviously much more volatile. But if I hold for 5-10+ years, the market will most likely be positive then. So wouldn’t my returns essentially triple over that long time horizon? I wouldn’t drop whole portfolio in it, but thinking about adding some.
Anyone know what I’m overlooking?
Chief
P1, exactly look at the past month.
VOO is down .09% and UPRO is down 0.95% (10x)
Chief
No, don't do it. Look up volatility decay.
Tldr, your losses will wipe out your gains.
NTSX is a replacement for a total stock market index fund that outperforms on a risk adjusted basis
Rising Star
You could invest in small cap or even micro cap indexes.
Rising Star
Why not? Given the mention of leverage, seems like risk isn't your main concern....
Crypto
No
DECAY
Do I sleep easier not having my life savings in leveraged index funds? Yes.
Do I love when $30k acts like $90k and SOXL/SPXL are printing me money? Also yes.
Set up stop losses. Lost a bit playing leveraged oil & gas etf, i was doing good but omicron variant wiped me out all gains.