They're less safe. Intuition tells you that one should be doing well and the other one not so much, but reality is that neither is doing well over the long term. 10x leverage makes it 1.3t/2 * .72t/2 = 0.936t/2 = .9674t , which is enough to make a $1MM investment go down to roughly $5 by year end.

Press question mark to learn the rest of the keyboard shortcuts. It's like blaming a dog for barking. In fact, the up volume of some of the bear 3X ETF’s (EDZ, FAZ, ERY) was the highest I have ever seen, especially on Friday.

It's similar to you paying commissions in a brokerage account. You can change your choices at any time by visiting Your Privacy Controls. Advertiser Disclosure. Seriously. Is it when I sell? But first, a little theory.

My 401k fund recently changed their rules regarding how often you can switch among funds.

Add 3x leverage and now you compound over the already compounded risk. Because leveraging also increases the quadratic variation (or, more accurately, some finite-time approximation thereof), which is killer. The 4 down days occurred on much higher volume than the single up day. Alas investing is also about taking calculating risks, risks taken without knowledge and understanding is gambling.

Is that acceptable? Also when the market is very down, you may have the opportunity increase your risk stance at a more attractive time. 3X leveraged ETFs are often associated with swing trading JNUG and co.

Read full article. increasing k) varies with the square of how much you increased it (it manifests itself as a multiple of k^2), a quadratic function. Never for weeks, let alone months or years or decades. Only if a person sat there and watched it be "destroyed". Depends on you. MarketWatch had this to say in “Wealth creators vs. wealth destroyers:” To learn that your mutual-fund firm’s lineup posted negative returns over a decade is one thing; to realize that almost $60 billion of investors’ wealth was wiped out is another matter entirely.

Boy you really hit the nail on on the head with today's bloq article.

The bottom line is that it’s not always the investment that should be blamed for poor performance; it’s what you do with it that matters. It makes the nearly 60% drawdown of the SP500 look mild. You can easily lose half your principle in a sudden correction. tlydon@globaltrend.com (Tom Lydon) July 9, 2012, 7:51 AM. Compare SPLX and SSO. I was a big fan of Janus Contrarian until about two years ago.Besides,was wealth really "destroyed"? One issue is that a 85%+ drawdown is very scary and will make you want to sell, causing you to miss the upswing.

Having an idea of the factors that negatively impact your savings and investments will help to limit the damage to your wealth, too.

In the last 10 years, the portfolio obtained a 8.89% compound annual return, with a 10.98% standard deviation..

So you actually lose .08% a day. I invite you to check them out.

There will be some lucky traders who make money off it, but on average, these are a terrible investment, which is why they are called gambling. Results were not much better at Putnam Investments, which shredded $46.4 billion of shareholder wealth in the period, while mutual funds at AllianceBernstein Holdings and Invesco Aim, a unit of Invesco Ltd. lost shareholders $11.4 billion and $10.1 billion, respectively.

The most popular 3x leveraged ETF is 300 percent long the S&P 500 and short 200 percent cash, rebalanced daily. What this post is saying is that even if the market increases (with some up an down), a 3x ETF is not the same in terms of returns as buying a normal ETF on margin with 3x leverage (margin loan). They are a day trading platform for professionals. During the bear it was higher. You don't just put money in it and then look at it 25 years later. 3X ETF's are not investments. This is ridiculously good: by year end, you can expect about 24.5% growth.

“Results were really influenced by what happened at the start of the decade, when investors rushed to tech and growth and then they crashed,” said Sonya Morris, editorial director at Morningstar.I continue to be amazed that, even with the benefit of hindsight, the blame is being put on mutual fund companies and not where it really belongs.

Unless you cash out, it's all an illusion. You would have hope you're fortunate enough not to have a catastrophic loss during your mid to late career. An an 85% drawdown.

With medium term expected returns at 4.6%, you're getting 4%, maybe less, bonus and 3x the volatility. Their returns are nearly identical. It's not too bad, but then I was reading some more fine print, you can only move $25,000 at a time before your considered a frequent trader and raises a red flag to them and puts you on some sort of probation where they have to approve the changes.

3 Wealth Destroyers. My question is why??

The figures show that fund investors risk not only picking the wrong type of investment, but also choosing the wrong firm for the job.

Given this known set up, mutual funds are not the wealth destroyer as they were made out to be in this story. They lose a significant amount to "decay" due to the costs of borrowing and rebalancing. Also look at JDST, the "ultra short" version. So getting a 10x leverage on an insanely optimistic stock market actually causes you to lose a ton of money, even though we saw earlier that an un-leveraged account in that stock would have given you legendary returns.

People who are buy and holders without an exit strategy of some kind are doomed to fail during bear markets similar to a ship without a rudder and the iceberg is just ahead. The market deteriorated very quickly last week. We are an independent, advertising-supported comparison service.



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