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Handle With Caution: Leveraged ETFs: Video Presentation
I don't use any devices with Flash anymore so can't see the Morningstar article but I am happily surprised by the other article that explains both the good and the bad of leverage to educate on the Math. Typically, most articles on leveraged ETFs want to advance the thesis that they are the devil's playtools.
Regarding the need to monitor on a daily basis, it shouldn't be interpreted as necessarily requiring manual monitoring. If so, then one isn't doing it right and liable to lose money. Besides, there is very little you can do watching it every day.
What you need is a strict discipline to having stop limits (I dont use the term stop loss because it assumes, you are just minimizing the losses. These stops are needed to protect your profits if you are investing successfully). And careful entry points.
This requires the ability to get triggers on some technicals like moving averages. It also helps if you have a programmable trading platform and have the ability to specify a few rules so you don't even have to react manually to triggers. But this is not available or expensive for most retail investors.
Doesn't guarantee that you will always make money of course because you cannot predict markets but it protects you from being stung by the downside of leverage while exploiting smooth movements as we have had on the long side this year to compound at high multiples.
Reply to @cman: Set up a hypothetical leveraged ETF buy or sell and show us your strict discipline and let the Board monitor your investing skill. Are you up to it ? Regards, Ted
Reply to @Ted: Is anyone suggesting any strategy here or stating their portfolio performance for the year up to doing the same? Are you up to doing the same when you criticize others for their investment choices like too much cash in a fund? Will @Junkster do the same with his trend following?
Is it reasonable to ask such a dumb question?
But seriously, it is way too much work to set it up in any meaningful way. Unless I am compensated for the time it takes.
I was actually exploring setting up a portfolio in one of the social investing platforms like Wealthfront before they changed their business model. There was a lot of support for doing things like that including making hypothetical trades, for people to follow the portfolios and have the portfolio owner to be compensated if anyone used the same portfolio. Even that takes more work than you can imagine.
Besides, there isn't any special skills. These are just learnt by observing people who do this for a living and getting hands dirty doing it. There is no magic here. Just a good understanding of how things work.
This thread brings back memories of bygone days. In the past and in other forums, primarily trading forums, to flush out Pretenders (as well as Crooks, Con Men, and Charlatans) I would package up my actual brokerage statements (for X amount of years) and send to the the board moderator with a challenge to the Pretenders to do likewise (they never did) This wasn't a biggest and baddest thing but more of what strategies worked best. This thread has no Pretenders (Ted is among my faves here and cman seems a breath of fresh air) In fact, this board has few if any Pretenders.
Anyway, sometime before I leave here on a more permanent basis I might package up my past 20 years of 1040s (coincides with opening my IRA) to send to David to demonstrate how well momentum/trend trading of funds works compared to buy and hold and other fund strategies. It runs counter to conventional wisdom, but I always found a more active fund strategy insofar as turnover is superior to one with less turnover (buying/selling) And also how a more concentrated portfolio outperforms a more diversified one.
Reply to @Ted: It appears from your answer and the recent posts some of it quite snarky to anything that doesn't please you, you have succumbed to a common affliction of board moderators everywhere. Getting a God-complex.
The usual remedy is a brief vacation to get a life outside the board that has consumed you. Works wonders I am told.
Reply to @Junkster: Thank you. I hope you understand my question regarding you was a rhetorical one to make a point.
One shouldn't have to do this as Ted asked. Pretenders are easy to spot. Besides, this isn't even a my strategy vs yours thing going on here. Just sharing own experiences not trying to prove something.
These kinds of challenges happen when something disturbs one's world view especially when it is religiously held. And people don't have the means to deal with it. Best ignored.
Comments
Regarding the need to monitor on a daily basis, it shouldn't be interpreted as necessarily requiring manual monitoring. If so, then one isn't doing it right and liable to lose money. Besides, there is very little you can do watching it every day.
What you need is a strict discipline to having stop limits (I dont use the term stop loss because it assumes, you are just minimizing the losses. These stops are needed to protect your profits if you are investing successfully). And careful entry points.
This requires the ability to get triggers on some technicals like moving averages. It also helps if you have a programmable trading platform and have the ability to specify a few rules so you don't even have to react manually to triggers. But this is not available or expensive for most retail investors.
Doesn't guarantee that you will always make money of course because you cannot predict markets but it protects you from being stung by the downside of leverage while exploiting smooth movements as we have had on the long side this year to compound at high multiples.
Regards,
Ted
Will @Junkster do the same with his trend following?
Is it reasonable to ask such a dumb question?
But seriously, it is way too much work to set it up in any meaningful way. Unless I am compensated for the time it takes.
I was actually exploring setting up a portfolio in one of the social investing platforms like Wealthfront before they changed their business model. There was a lot of support for doing things like that including making hypothetical trades, for people to follow the portfolios and have the portfolio owner to be compensated if anyone used the same portfolio. Even that takes more work than you can imagine.
Besides, there isn't any special skills. These are just learnt by observing people who do this for a living and getting hands dirty doing it. There is no magic here. Just a good understanding of how things work.
Regards,
Ted
Anyway, sometime before I leave here on a more permanent basis I might package up my past 20 years of 1040s (coincides with opening my IRA) to send to David to demonstrate how well momentum/trend trading of funds works compared to buy and hold and other fund strategies. It runs counter to conventional wisdom, but I always found a more active fund strategy insofar as turnover is superior to one with less turnover (buying/selling) And also how a more concentrated portfolio outperforms a more diversified one.
The usual remedy is a brief vacation to get a life outside the board that has consumed you. Works wonders I am told.
One shouldn't have to do this as Ted asked. Pretenders are easy to spot. Besides, this isn't even a my strategy vs yours thing going on here. Just sharing own experiences not trying to prove something.
These kinds of challenges happen when something disturbs one's world view especially when it is religiously held. And people don't have the means to deal with it. Best ignored.