3x Leveraged ETFs : What They DON'T Want You To Know
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In this video we go over 3x leveraged ETFs.
#WallStreetMillenial
been holding TQQQ for 4 years now and im up over 1000%.
Do you DCA periodically or do you invest a chunk of money?
I always suggest reinvesting, if you have to live off dividends on ETFs or earnings in retirement.
I reinvest my ETFs dividends 100% and will do so for years growth.
I am so big on stocks and it has worked well for me, but I also like to have a well balanced, low-cost set of ETFs that keeps the money in my pocket. I would love to maintain a similar effective approach on ETFs.
Have you considered the possibility of cashing out some of those dividends for paying off your monthly expenses, instead of re-investing them? Bcos I need a lot as rent, inflation alone eat up almost all of what I make.
tbh I keep compounding, adhering to well established structure from a professional, can bring tremendous value! I’ve trimmed, added also and now my average growth has increased in the past year while participating behind a top performer. I put in 65k few years back, now effectively remits over hundred k and increasing.
Melii a lot of people let their dividends ride for the long-term given its solid returns effects overtime
I can't imagine crying over a 1% fee for a stock that earned me 2362% when the alternative was paying a 0.46% fee for a stock that earned 338%. That's like a minimum wage earner turning down a $1 Million dollar lottery ticket because they didn't want to be bumped up to a higher tax bracket.
The alternative is to just use margin. That makes you less vulnerable to volatility assuming you don’t get margin called (or have enough savings to cover it, happened to me during covid and I came out ahead long term. For someone young building an account, it is not only profitable but even responsible to seek 200% leverage on a diversified portfolio of index funds. At 22, even if I lose everything I can rebuild and statistically come out ahead long term. Basically, the idea is that you reduce your leverage as you age, and go more into fixed income. Even with only 150% leverage, I’m up ~74% since the top of the market before covid, right when I took on additional leverage (although admittedly some bullshit stock picking went into that, as well as a bit of luck). Shitty timing though lmao. This is using margin, not leveraged etfs. Meanwhile direxion 3x etf is up ~30% since then. This is because they replicate daily returns, as opposed to long term. tl;dr, daily leveraged etfs aren’t the best way of getting leverage. Use margin or derivatives instead.
There are research papers backing up the idea that young people should seek out greater than 100% exposure to market returns (and risk).
@@TheTaquitoProject So you are using margin, increasing your exposure, then buy into various etfs that tracks different type of sectors?
How about paying a 1% fee for something that wipes out your position?
It's like turning down a lottery ticket when you're not sure if it'll win. Past returns don't mean future returns
Every crash/collapse brings with it an equivalent market chance if you are early informed and equipped, I've seen folks amass up to $1m amid economy crisis, and even pull it off easily in favorable conditions. Unequivocally, the collapse is getting somebody somewhere rich.
I do not disagree, there are strategies that could be put in place for solid gains regardless of economy or market condition, but such execution are usually carried out by investment experts with experience since the 08' crash
The issue is people have the "I want to do it myself mentality" but not equipped enough for a crash, hence get burnt. Ideally, advisors are reps for investing jobs, and at first-hand encounter, my portfolio has yielded over 300% since 2020 just after the pandemic to date.
i'm blown away! mind sharing more info please? i am a young adult living in Miami where i've encountered several millionaires, and my goal is to become one as well.
NICOLE ANASTASIA PLUMLEE' is the licensed fiduciary I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I just curiously searched her up, and I have sent her an email. I hope she gets back to me soon. Thank you
Volitility drag is still typically cheaper than the cost of debt and application of traditional leverage on a non leverer instrument with no margin call requirements.
Here's another fun fact the stock market is down because of OG Reggie B. I told you guys, no one's going to get any money until I get mine TQQQ @ 70, 35, 25 and 19. These are all my buy entries they make good trading around information. Don't say I haven't given you anything lately peace✌...
Remember we had near-zero interest rates from 2009 to 2016 and for a period after 2020. If you try to use leverage today, you'll be paying significantly more interest on that debt.
They don’t use debt to create leverage. They use daily derivatives, so there are fees, but those fees are not based on the current interest rates.
As the other guy said, no interest rate costs on the fund's positions. You got the correlation right but misunderstood the explanation. The reason it did so well is that we had a great bull market. And investors should understand that to put the performance into context. Things have already changed significantly. It's not at all certain that we are going to experience near-zero interest rates again/soon.
Also volatility drag. If the market trades sideways on a 3x leverage etf, you're going to lose a lot of money over time.
@@Nuttymike Yeah, unless you have a good reason to believe that the market is going to trend mostly upwards for as long as you hold your position, 3x the S&P 500 is just gambling. More reasonable to just go and play poker.
@@davidradtke160 But where does the money come from? If you are using derivatives (therefore, not investing directly into the real asset), it is like a zero sum game. So who is losing the money here? Sorry for my ignorance but I really wish to understand because using real debt to invest is something I get, but I do not get how can leveraged ETFs with daily resets beat the market.
Me after listening to DOGE and GME videos for 8 hours straight:
"Would you rather have pizza or McDonald's?"
"I personally would go for the pizza. This is in no way financial advice, always do your own DD before making a decision."
You mean Wendys or McDonalds.
Something you'are not considering here is that at the beginning of an investment journey you wont have much market exposure, you'll have less money to invest; at the end of your life, you'll have more money to invest but less time to recover. So probably the best thing to do is to leverage your positions when you are young (you can recover if things go southways) and reduce the risk as your portafolio grows and you get older.
This was a very fancy way of saying "buy in up trending market, don't buy in downtrending"
Can y'all talk more about the dynamics of how a century-long triple-leveraged S&P500 with a constant yearly investment of $100 would result in 13 million dollars, while investing only in the S&P500 itself without leverage would net only $500k? And can we get this data ourselves?
I think it is because of the compound effect, Like if the non leverage ETF is up 8% in three year, then it capital is worth (1.08 x 1.08 x.08) = 1.26, mean that it will up 26% in those three year, while the 3x leverage return (after 1% fee) would be (1.23 x 1.23 x 1.23) = 1.86., which mean that the 3x leverage in a bull run of three years actually provide higher than 3x the return of the non leverage ETF in that periods. In this case is 8%. Another good way to see it is to looking at the log return. which I will give a more details answer later
I'm a fan of tqqq. I sometimes think of creating a 75% portfolio of schd and 25% tqqq
SPXL has much less volatility and survived through the 2020 crash and 2022 bear market
Honestly I’d make the argument that holding tqqq or qld long term is safer than holding any individual stock. The reason I say this is because sometimes companies can decline, and their stock price may not go up LONG TERM. Major market indexes such as the NASDAQ that tracks qld and tqqq will always go up in the LONG RUN. Sure there will be shitty stretches with big drawdowns. But look at a chart. Major market indexes go up in the long run… stocks not necessarily.
true... i agree with you
I have honestly been thinking about that. The more I think about it, the more it makes a lot more sense to buy shares of leveraged ETFs like TQQQ or UPRO in favor of picking stocks if you are looking to grow your nest egg. Unless you really think the stock will perform that great or you do what stocks that pay dividends. TQQQ has even beaten some stock with great returns since their inception. With holding leveraged ETFs longer term, you kind of are basically betting on market going up over the long haul which history has shown is likely to happen. Currently in TQQQ, TECL, TNA and SOXL. Stocks would be better than leveraged ETFs if you want a dividend portfolio.
Patience kills all fear. If you can't stomach the dips then 3x is not for you.
I look to nail the dips in the drop... Hard.
If it drops 34% the position is lost tho
I plan to use it to invest in sp500 if it dips like -10% and more
@@marthvader14 not if it's rebalanced daily, the market as a whole would have to drop 34% in a single day for the position to collapse. However, say the market drops 20% in a single - on 3x leverage you lose about 60% of the investment. Next you rebalance daily, you sell your positions and you reopen them so every ticker in the S&P500 is leveraged at exactly 3x again. Now the market would need to again drop 34% to wipe you out. The scenarios in which there have been many consecutive bear days are the days the ETF likely loses ~90% of it's value in the video.
@@marthvader14 only, if it drops that much within 1 day tho, I think.
this channel is SOOOOOO underrated!
I agree leveraged ETFs do face some decay in prices due to their option positions when markets in a downturn. But, these ETFs definitely give u higher returns than the normal index for a long term. Its advisable to buy these especially when market crashes
You can sell covered calls and also puts to offset the decay. Actually I know people who even hold TQQQ for months and they still come out on top!
@@RicardoHernandez-zr1pw sounds about right!
Are you better to buy -3x Inverse Leverage ETP'S than to short a stock for a crash?
Whats your opinion on buying btc and ethereum 3l the etf is around 1 dollar on kucoin and I expect it to go up exponentially. Is this the investment of a lifetime? Idk?
@@kylerrrr totally depends upon your selection of which stock to short
13:30 that's exactly what I did when market tanked and SPXL went 25$ per share.
UPRO did better - from $18 when the virus came to $117 today (it has a lower fee)
I initially held around $400k of TQQQ and UPRO between 2017 and 2018. I got burned big time during the market crash that happened in the end of 2018. My $1 million portfolio dropped back to $300k. I've made it all back eventually and put it all in TSLA at a very good timing. I slowly sold out my TQQQ, TECL, and UPRO and slowly bought roughly 1000 shares of TSLA. After the split, I now have a little over 5000 shares of TSLA. I would try to avoid 3x leverage in the future because the swing was insane and it was unhealthy for anyone holding it.
Ouch but 5000 TSLA .. don’t touch it for 5-10 years minimum
Why didn’t you just wait it out??? You would be up big today if you held them still. I don’t see nothing wrong with them. But good job investing in Tesla cause went up big too.
why does it matter, as long as you are willing to hold out, wouldn't you have been ok?
You think TQQQ has insane swings. Try Crypto. You wouldn’t last a week.
@@jeanads7968 noob
In February alone there were about 30 leveraged ETFs that were forced to liquidate. If it were so straightforward to amplify gains by taking on leverage then Archegos would still be in business.
Any leveraged etf that doesnt track the nasdaq 100 or s&p500 is worth shit; those that do, are the shit
@@geforce5492 🙄
You know why? Because if any triple leveraged etf that is copying the s&p and the s&p drops by 1/3 the whole fund is liquidated and everybody loses everything.
Nothing to do with these idiots but that they are used to hedge and not for investing long term
@@geforce5492 fas is good too.... banks are always cleaning up
@David A try it, let us know it works out for you lmfao
Since the stock market long term has more up days than down days, the compounding gains of the up days outweighs the compounding losses of the down days. Dollar cost averaging can further reduce risk. As long as we don't have one of those lost decades where the market is flat, one can expect to outperform with a leveraged ETF.
A huge consideration in this is the interest rate. There isn't a lot of tranparency in the derivitives market but basically banks are the counterparties. When they create total return swaps they often go out and buy the stocks and tack on their cost of capital plus what they need for counterparty risk and their own profit. Since 2006 we have had a federal funds rate of basically 0%, meaning that banks would much rather create derivates than park their money with the fed overnight and earn 0. But before that, the average was about 6%, going up as high as 19% in the early 80s. The fund would have to pay up to 3x this price annually out of the returns and now that we are in a high interest rate environment, this is a huge factor again.
While I'm under-performing the market, I'm sticking with my strategy to keep buying solid companies with great balance sheets when they go on sale and holding plenty of cash to average into a 3X ETF when things likely go south at some point.
You buying up them 3x now?
@@LitMedia794 I'm staying the course on my value plays and lightly dipping my toes in SPXL & VT dips until the point I don't even want to look at my portfolio. That's when I want to get more aggressive than ever.
@@vvolfflovvpoo
As someone who goes to a top Ivy League university studying applied mathematics for investment banking this video is taught better than most professors lol
Does the maths check out?
@@AG-en5y yes
@@flockofseagulls1421 he didn't account for daily resets.
@@AG-en5y No it doesn't, see my comment above.
@@JanischMaximilian Exactly, the video was just pulling numbers out of its ass for the modelling
Optional Stopping Theory assumes that the stock market is a Martingale system, i.e. random system, similar to a random game like roulette. However, the stock market has been empirically shown to not be random, but chaotic. And with apologies to Burton Malkiel, this is settled science.
How does this alter your premise stated in this video? Or does it?
Excellent video BTW!
Hopefully even a dimwit knows the stockmarket isn't random ... hence why we are able to make precise stock predictions for gains using technical analysis ... for instance a breakout of a pattern in a stock might signal a 50% higher price target which it hits subsequently perfectly, before tanking thereafter. Or a stock falling significantly but then holding to the penny at significant support level. And buying at that exact price. Nothing random about it.
In the long bull market, the leverage ETF will compound the gain and give you higher return in long term. In case if stock index like HSI in Hong Kong that stay in range long time, it will be the best case to explain the decline of daily leverage ETF due to volatility, the worst market to hold.
@13:30 Running the simulation using Dollar Cost Averaging seems like a way to hold a leveraged ETF (or mutual fund) long term. You must (1) be young enough to hold for a long time, (2) setup an Automatic Investment Plan to purchase same amount each month, and (3) only invest a minimal percentage of your portfolio, so that you can ride out the inevitable dips without being tempted to cash out prematurely.
Stocks extended their year-to-date rally following the CPI report, with the S&P 500 last up 0.8% in afternoon trading. but I don't know if stocks will quickly rebound, continue to pull back or move sideways for a few weeks, or if conditions will rapidly deteriorate.I am under pressure to grow my reserve of $250k.
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks.
This is why I've entrusted a fiduciary with my investmnt decisions. Many underestimate advisors until emotions lead to losses. My advisor crafted a tailored strategy aligning with my long-term goals, guiding entry and exit points for the equities I focus on. This has grown my portfolio to over $850k. My personal best so far
Please will you be kind enough to share the details of the person that helped you?
'Vivian Carol Gioia' is the licensed advisor I use. Just research the name. You’d find necessary details to work with a correspondence to set up an appointment.
I find this informative, curiously explored Vivian on the web, spotted her consulting page, and was able to schedule a call session with her, she shows quite a great deal of expertise from her resume.. very much appreciated
This is a very balanced presentation. With the leveraged investments, precise timing is everything; they are typically OK for short term trading only. I will also say that the quality of your recent posts have really moved to a different level; much more sophisticated and real analysis to boot. Great job!
That’s definitely not the case. Long term holders of tqqq have turned a 10,000 investment into 800 k over the last ten years. Sizing of a triple leveraged etf in your portfolio would be far more important than timing.
@@franklintyler4652 I'd say an 80/20 (80/60) approach could be valuable. Thinking about making a pie in M1 Finance like that.
Here's another fun fact the stock market is down because of OG Reggie B. I told you guys, no one's going to get any money until I get mine TQQQ @ 70, 35, 25 and 19. These are all my buy entries they make good trading around information. Don't say I haven't given you anything lately peace✌...
I bought soxl at $7 and sold at $26 the other day. Held since October… You can’t tell me this can’t be held long term.
@@codechartreuse uuuggghhh. Not sure you understand that a leveraged ETF is a wasting asset
All I have to do now is live 150 years
I'm long on SOXL (3x semiconductors etf) and its crushing it. Based on the SOXX non-levered ETF. Great video!
selling puts on that. all i need from leveraged etfs is high implied volatility, high volume, general uptrend.
Same here on SOXL, TQQQ and SPXL. So far, so good.
Getting back in on soxl on the dips for the long haul.
@@marktwain580 same!
@@GS-rn3jh how is your return so far in this bear market? I have been selling put on SOXL, TQQQ and UPRO since June 2022. Result has been good so far, but I am thinking how if you start that like Jan 2022.
Buying a 3X SPY is much better than buying a 3X single stock
yup definitely...next to no risk
@@ssingh8166 "next to no risk"
@@RocketScienceKSP even crossing the street has some degree of risk.....
@@RocketScienceKSP if ur looking for something with no risk, best u can do it put ur cash under ur mattress...oh wait even that has risk bcoz it can be stolen....
@@ssingh8166 even that has risk of your house sitting on fire the currency inflating to an insane degree and it getting stolen
5:34 is comparing apples to oranges. 3x leverage means 3x daily return which is compounded daily. So if that return were consistent so that there were no volatility drag, it would eventually result in 7x, 100x, 1000x, etc more return than the benchmark given enough time to compound. The 338% return over approximately 4500 days is equivalent to a consistent daily return of .0328%, while the 2362% return of the 3x fund gives .0712% daily, or 2.17x that of the benchmark. So it is misleading to say 7x is even better than 3x despite concerns over volatility drag, when the exact numbers presented actually show that volatility drag reduced the earnings multiplier by almost a third.
Hey there, i want to ask you a question about these x3 ETFs.
If i were to hold one share of either of these for ~ 100$ and some day the share were to go bust dropping down to 0$, would i just lose 100$ (whatever i invest in) or would i lose 300$ (added leverage)? As in if you buy these leverage ETFs, are they just more votatile or are you taking on margins that you have to pay back if you lose (leverage/borrowed money)?
@Kyle I kid you not, this is one of the first sensible comments I found in this comment section.
@@NathanPark3r You are not exposing yourself to a loss greater than your investment. Worst case is the investment losing all its value, the same as it is with ownership of any other stock. In your example the loss is $100.
Well put! I have to admit, you are making a lot more sense than all those "stanford math undergrads" or "ivy league students" in the comments. Makes me question the standards of these schools these days.
oK now explain it to me like I was an 8-year-old -Michael Scott
Buy low, sell high
Or a golden retriever. :)
Lmao stonks go up.
Leveraged stonks go up more.
@@chimchu3232 Its like one rocket going to the Moon and another going to Mars.
@@bigm8555 Which also means that the rocket to Mars has much more probability to fking explode, or being invaded by space pirates. Grate explanation!
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
Those sound like great picks! consider financial advisory so you don’t keep switching it up, top 3 payers for the month were $OHI, $KMI, and $EDP... not bad for 350k
You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 14.3%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an advisor.
I'm intrigued by this. I've searched for financial advisers online but it's kind of hard to get in touch with one. Okay if I ask you for a recommendation?
I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.
Wow, her track record looks really good from what I found online. I'll take a chance and see how it goes. Thanks for the info
This ETF has dropped by almost half since this video was made. I'm thinking it may be a good time to jump in (maybe just dip my toes)
Wow, that was amazing. Keep the great work up!
i really appreciate the non-biased way you presented this info. Everyone else is like "wow leveraged etfs are scary, stay away cuz youre probably too dumb". They are probably right, but at least youve given me the benefit of doubt that i might learn. there are upsides and downsides and the downside are a quick way to move into a cardboard box.
Nobody is too dumb to learn anything. The only thing holding yourself back from becoming a millionaire is you. Don’t let these demons Lower your vibration
Any trade you take could dump into the toilet. I think the important thing with these is to pay close attention to them on a daily basis and be ready to act if you see trouble. The only reason Im looking into these is because TD ameritrade won’t let me short anything without buying it first, Im looking into inverse etf’s so when the market starts heading south I dont have to sit on my hands for week waiting for it to turn around. I have no interest in holding them long term, I’m just looking for something to play with when the sentiment is bearish.
Also, after the roughly 30% drawdown, the $SPY retouched all time highs in August of 2020. By that time $SPXL had only retraced a little more than half of the pullback, nowhere near the all time highs it should've been at if time decay weren't adversely effecting it. It took an additional 6 months for $SPXL to regain its' former highs.
SPLX has crushed... as of december 2021
Excellent analysis. However, the final chart showing the impact of investing $100/year into unlevered and leveraged S&P does not account for dividends. Reinvesting the dividends into the underlying index is an important factor to consider when measuring the performance of an index over long periods of time.
My thoughts exactly, payouts earnings etc reinvested could absolutely make or break a trader
@@zekerobinson2948 an even more rigorous study would take into account the effect of selling call options in both scenarios. Since leveraged etfs generally have more volatility, you can expect to receive higher premiums than a non levered etf.
Sometimes, i feel protecting your capital is much more important than making money. I'm approaching retirement with comfortable millions, yet scared of a market crisis and how to benefit from a possible correction. Where do I best grow my money?
With $70k, I'd suggest a mix of index funds and a few individual stocks. Diversify and watch out to not get burnt out. Good luck!
DYI never ever shows you where the market is going. That's why you DCA in quality stocks on dips and invest for the long term. Most importantly consider financial advisory for informed buying and selling decisions.
greed, the role of advisors an only be overlooked but not denied. I was shocked that I made more money with investing than hard work, not even my CEO income. Earning ''return on investment'' fetched me millions within a space of 5 yrs.(But I still enjoy working)
Agreed, the role of advisors an only be overlooked but not denied. I was shocked that I made more money with investing than hard work, not even my CEO income. Earning ''return on investment'' fetched me millions within a space of 5 yrs.(But I still enjoy working)
Bravo! mind sharing details of your advisor please? my job doesn't permit me the time to analyze stocks myself
Another point you might want to make is that because the leverage is matched on a daily basis, the return is 3x on a daily basis. Therefore it's as if we are compounding on a daily basis at an interest rate of the 3x return. Because of the compounding effect, the annual/ long term return can be much much larger than 3x that of S&P. For example 1.009^365/1.003^365-1=7.56
lol. Fake good at math
If you don’t understand how losses count more then gains in leverage hush.
@@joesmith3590 I'm a quant a a first tier IB and I think I know what I'm taking about. lol
@@joesmith3590 im not fake good at math.... I'm just bad. is it because of percentages?
Agreed if you take a look at upro it has returned much much more than 3:1 to the underlying S&P since inception.
5,805.36% vs 457.19%
Beautiful analysis! Thank you.
Love the video. We need more.
I’ve tried investing in various things that didn't work out as I hoped. Now, I'm looking at ETFs as a more reliable option. What are the best 5 ETFs for a rookie looking to invest a lump sum? let's say $500,000.
An ETF with more risk and payout is QDTE. It pays weekly but is higher risk because it just came out this year. The fund is based on covered calls which make money in any market, up or down.
@SlowrideHome91 Can you share details of your advisor? I want to invest my increased cash flow in stocks and alternative assets to achieve financial goals.
Can you share details of your advisor? I want to invest my increased cash flow in stocks and alternative assets to achieve financial goals.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
You only need two. VTI at 80%, VXUS at 20%. This will track the whole stock market
So wait until the next crash and then try this out as part of a strategy when the recovery starts.
The moral of the story is that if there's another great depression like scenario it's going to near zero and not coming back any time soon.
Just like with any other investment types - this is (power) tool. Super effective at what it's supposed to do, but if you're not careful, you can lose an arm.
Yea but can’t you just hold it for the long term? Then your fine.
@@Chris-wk8nuthis is what I’m not understanding myself. Why can’t it be held through down times like any other stock?
Because it's not stock but options, if S&P500 goes down 33%, the fund is wiped out@@Kevinw4040
Super well researched and explained video! Keep it up :)
i sold spxl at 70$ because i was sure that it wouldn’t go any higher, i regret it.
Yeah but the next time you’re going to hold it and then it’s going to eliminate all your profits. You shouldn’t beat yourself up over it, you made profit which is great. Nailing the bottom and top every time is impossible
@@FalsePips Right on. At this point, that 60/40 portfolio after a crash is looking real good now.
You did the right thing, don't get greedy
Awesome Explanation ❤
Even with volatility drag, wouldn’t the leverage still be better long term? Sure it goes down more but it goes up just as much. You just got to sell it high, just as you would with a normal etf
Leveraged ETFs offer the potential for significant gains that exceed the underlying index, for people that are familiar with futures it is very easy for them to understand how ETFs work, many exchanges like MEXC are now offering Leveraged ETFs with up to 5X.
A stock market, equity market or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms..And I'm making so much from my investments.
Nothing seems better than a profitable investment to me the feeling of a rise in portfolio or cashing out monthly, could you elaborate on what you are saying I am interested with the type of wealth I'm trying to attain/build I should do things that make me money not take away my money, I woke up into reality,realizing and telling myself that no great person has ever built wealth from their salaries alone,All my efforts have gone down the drain investing as a newbie,could you please tell me how to make passive incomes too.
8 years ago in 2012 when I started investing in stock&bond my Financial advisor/Portfolio manager Mr Noud mika suggested I bought some stocks that he knows will yield valuable profits and he also forecasted that these companies will triple their net-worth in a space of 8 years.I did not regret taking he's advice because I've made over 2 million in raw profits over the years.I started with $200k back then.
Noud's mail is
@: noudmika@gmail
Job well done to Bloomberg for doing a shoutout back in 2017 about he's services and accolades.I invest with Noud Mika too from Belgium very encouraging of you to put up he's name in regard to his trading expertise coupled with experience, skills, and versatility in different markets
.With Mr Noud Mika at the helm of affairs of my trades,I have been able to build up a portfolio of shares that has generated a decent return of $240k in profit over a long term trading.
Just stumbled over this. Had been just looking at a specific index leveraged etf a couple weeks ago. And kicking myself for not investing when I thought about it when it first hit the market in 2010.
BRB going all in with leverage to buy the 3x Leveraged ETF
@@ADUSN So, all in on OTM calls with margin?
@@ADUSN Bwahaha
Brings up another question , would it make sence to consistently open and close short positions on sqqq since it’s a product that is designed to go to zero over the long run
Also SPXL doesnt' give as good of a dividend as SPY straight up. So reinvesting dividends is more consistent during bear markets.
3x leveraged etfs are a major go after a crash. It is what I traded. Except I was in TQQQ after crash and not SPXL
The triple leveraged funds allow for better opportunities to lower your cost basis during downturns which I’m sure far exceed the reinvested dividends right?
It would have been more useful to show the chart at 14:17 min in a logarithmic way, so you can see the downsides better
Also maybe a comparison to the SSO (2x lev) would have been interesting
Greetings from Germany!
You have to be very careful (and it’s unwise) if 100% of your portfolio is composed by 3x leverage etfs. Let’s say the general indexes (Dow Jones, S&P 500, Nasdaq) are down 33% in day, your positions will be down 99%. You could win by buying the 3x bull for 20 years, but a single bad day would make you lose everything. Diversifying by depositing $100 a month would still make your portfolio be wiped out.
Just a friendly warning to those who are considering these type of financial products.
So theoretically if I get this right. If I put 100$ in 3x and market dipped 50 points- I’d be down 150$ basically at -50$ in the hole? Say this happened 2 days in row I’d be down another 150$ now sitting at -200$ in the hole?
@@Kevinw4040 no, they are leveraged daily. They would have to drop that much in one day for anything to be "wiped out", and consecutive days do not act the same. 2 -50% days would be -75%, not -100%
I YOLOed a few hundred dollars in SPXL a little less than a year and a half ago and it’s up 70% now. I feel like there’s definitely something special about these.
seems pretty easy to set up a trading program and strategy that buys them 3 times leveraged then employ reasonably tight stop losses that doesnt have a 3 times downside
OR even just buying on a dip and the setting a trailing stop loss. Even a normal stop loss at 5% down in case you got the direction wrong. Or just keep dollar cost averaging shares and set the stop loss at your total cost of ownership.
I have heard people complementing leveraged S&P 500 with leveraged U.S. bonds and gold to smooth out the overall volatility. It seems it would work in theory.
7:58 is incorrect. It's the percentile difference of the leveraged ETF, not its difference that is a Brownian motion. This leads to an additional drift term causing it to not behave as a martingale, due to the implications of Ito calculus. Do correct me if I'm wrong.
Leveraged ETFs may still be a good investment vehicle, but don't throw a large chunk of your portfolio into it. Be careful with your investments and do your own due diligence.
How would you feel about an investor hedging by putting 55% in SSO (2x leverage SPY), but also putting 45% in UBT (2x leverage TLT)? That gives about the same risk as 1x SPY, because of the bond exposure, but also provides higher long-term returns
I use the 50 Day Moving Average as a contrarian indicator and buy leveraged etfs only underneath it.
The application of Doob's theorem here is also profoundly misguided. If there's a large enough loss to trigger the issuers of the swaps they use to close out the agreement (which is specified clearly as a risk in the SPXL prospectus) then the fund will go to 0. The process is a supermartingale and the expectation of your gain at the stopping time is negative.
Imagine writing the Investopedia article and thinking that looking at its track record over just 1 year is enough to write off the investment.
So stupid.
Since its inception, UPRO has returned like 30% CAGR while the SPY did 11%.
I have taken daily data from the 3x leveraged ETF and calculated annualized returns and volatility. With 95 percent confidence interval, or between 2 st deviations, the lower bound will be positive after 3 years and average hovers around 30% or 29%, net of fees. If someone can stomach dramatic swings I'm valuation, I could argue that a 3 year hold is better than an overnight hold, as long as your return requirement isn't greater than 29%.
It's not. It gets rebalanced daily. It's designed to day trade. Don't hold longer than a week. Anyone who tells you to hold leveraged ETFs long term is not your friend.
@@Hyperion_40k You should study volatility decay. Anyone who says not to hold it doesn't understand that daily rebalancing can benefit as much as harm. The distributions are already explained above. All a levered ETF does is expose you to a market beta of 3.0 instead of 1.0. If one believes stocks "only go up" over the long term, why not go all in? Returns are not in a vacuum, most forget the denominator (risk). Sure there is excess vol, but there is excess returns as well.
The short leveraged etfs like SQQQ decay. Not meant for longterm hold
@@omarshaar2 TQQQ for example decays as well, not only short positions. One has provided substantial returns, one would have lost 99.99% of your money. Run thr static pools of each monthly return to today. What do they say?
@@Hyperion_40k stop spewing unexplainable nonsense you read on investopedia. There is no evidence of this. I had Gush at $30. It went to $12 and then to $200. It’s now at $145. My account isn’t halved in value because of decay nor because of 1.6% management fees compared to 1000% gains we made. Bunch of Series 65 Finra conmen confusing everyone to keep them away from the markets.
Brilliant stuff man!
I’m so confused with these 3x etfs. He said in the beginning of the video 100$ invested over 10 years grew to 2700$ vs. 570$…. If these aren’t designed for long term holds why is he showing an example of how a 3x etf will perform being held for 10 years???
He didnt say they're not designed for long term holds. He's clearly suggesting that long term holds work brilliantly. But I suspect he overlooked higher interest rate environment now which might alter the process.
The example at 4:20 is cleverly structured in a way to assume that the first day it drops by 20%. Only if they changed it to assume that the first day it goes up by 20%, it'd be an opposite scenario where 3x leveraged etf would outperform
It also assumes that you take your money out within two days of the drop. Ridiculous. But I'm slowing down on defending triple-leveraged ETFs. The fewer common people getting rich from it, the more it stays under the radar and some suit doesn't shut it down.
That's not correct. Do the math and you'll see you end up down more with a leveraged ETF if the market goes up 20% then down 20%.
@@goliathonscave9834 good luck
Theoretically one could make plenty of room for upside potential while protecting themselves to 50% loss of capital by putting on mid to long term options collars. Studies have shown to yield superior P/L in holding individual stocks through earnings compared to only owning stock. The danger of sharp drawdowns in leveraged etfs is similar to the danger of binary events in individual equities.
I live off my portfolio, and it’s like 85% ETF’s bro.
lol I use to do that too. When my portfolio starting getting bigger, I gradually started to deleverage
I mean it really DEPENDS on WHEN YOU’RE ENTERING into this position
Oooo....now I know why every time my investment gets back to its cost average it’s still says am down even though I should be break even. Yep considering dumping these and just buying the SPY or QQQ. Thanks for this great explanation.
took me a while to get this too, staying away form these, almost bought em for IRA>
Say you bought 100 x shares tqqq at $50 for $5000. It's goes through a bear market, up and down back to $50 stock price. Will your 100 shares still be worth $5000?? Surely yes? I'm quite new to this
instructions unclear, yolo'ed whole portfolio into 200x leverage
Got it, next crash just go all in on spxl
4:40 same goes though if you go up 20% and then come back down on a given hypothetical day. The 3X would still be up 28%
Huh? How?
"billionaire made a move that could help knock down his tax bill and it’s a move accessible to wealthy investors with realized capital gains in their portfolio"
TECL is still up over 8000% since inception
The optional stopping theorem does NOT imply that the longterm return of a leveraged ETF is on average 3 times that of the unleveraged underlying asset (or any specifed multiple for that matter). In fact, with high enough volatility of the underlying asset and a high enough leverage factor, a leveraged ETF is mathematically guaranteed to go to zero over a sufficiently long period of time. This is not a contradiction to the optional stopping theorem as it simply means that the process implemented by that ETF indeed has a negative expected return. In general, the expected return of a leveraged ETF can be expressed as a function of the leverage factor, the average return of the underlying asset, the volatility of the underlying asset and some higher order quantities related to volatility. That expected return of a leveraged ETF can easily be negative even though the return of the underlying asset is positive (e. g. a 10x ETF is almost assured to go to 0 within a relatively short timeframe unless the underlying asset displays basically no volatility at all).
Lol this is like masters thesis level of research right here you just earned a subscriber ! More vids like this and this channel will blow up even more
The vid is decent, but by no means close to a master thesis.
If we keep holding while these leveraged etfs are low , do they come back? Or you lose money and never get back like normal etfs?
This is my question. It seems a bit risky
Damn, I love this channel..
+/1/3/1/2/6/6/1/5/4/4/6
Great video, so glad I watched it!!!
I prefer 2x leveraged ETFs. They still have neat returns and you can sleep better at night during a crash.
@The Contemplated Life I am from Europe and prefer the AMUNDI ETF LEVERAGED MSCI USA DAILY UCITS ETF . TER: 0.35%.
@@thomasmuller1850
You should be able to trade SSO
I’d be curious what the returns of that $1000/yr investment would be if you reversed time (so 2020 was the first year, then 2019, and so on). Seems like starting off in the great depression may bias the result to the upside.
Buying tmf options a good idea?
This is the best video I watched talking about leveraged ETF.
Would be nice to see what happens in case of other underlying assets, like QQQ
Are we calling the 1987 Crash a flash crash now? Flash crashes are when one stock drops precipitously for a very short time.
Very good work
TECL is the best leveraged ETF
Thank you so much for your detailed research and explaination. I was getting so tired of all the websites and youtube people and their confirmation bias, saying the same things. I've taken measurements of leveraged ETFs vs. non-leveraged and how they've performed over the last five years or so. Leveraged in all cases had better returns than non. I apprecaite the caution regarding extended bear markets, as my expermient did not consider that. Interesting findings, and ideas here. I was wondering if dollar-cost-averaging could be an effective way to use leveraged ETFs (in theory at least).
Excellent video.
If you see these levered ETFs, short the bull and the bear versions. Both will have a “controlled descent into terrain” as time goes by.
Are you doing this? I just started an equal short position in TQQQ and SQQQ. It requires daily rebalancing so I'm just adding short shares to the one that went down that day to keep them as equal as possible.
Super helpful digest
please post more stuffs like this instead of bets, thanks!
What if we invest for 10 year or more? As per past data it result very well... Is it good if we invest for 10 year?
So, if I'm understanding this video correctly, the best strategy is to make a recurring investment in a leveraged ETF, to diversify against downturns?
Normies say you shouldn't use 3x ETFs. Which is why they're still poor
you will find out soon enough, holding leveraged etfs long term not a good idea, better of with a leveraged position/portfolio, 3x etf are for day trading
@@WorshipDaKing triple leverage with a small amount of your portfolio destroys simply using an equal amount of leverage straight up to buy more shares. Your analysis is weak.
@M B you realize that we just had a market crash last year correct?
@M B also leveraged funds fall even more than their benchmark indicies... which means you get to buy at a greater discount.
@@franklintyler4652 a “flash” crash that recovered within days and weeks is not the same as a sustained bear market that drag out for 12-18 months.