does it EVER make sense to buy and hold a 3X bull ETF ?

[sprstpd]

My advice is don't do it. Buy silver yourself (with a vehicle that you are comfortable with) and just hold it. Do not buy and hold a leveraged ETF for long periods of time.

 

[sledgeyum]

It was never $5. Just like upro was never $10 and SPXUwas never $500.

Well to calculate the returns of TNA since 2009 price low I simply looked at the long term monthly price chart.

The 2009 low was 5.11

The 2015 June high was 99.


So just do a percent return calculation of those two numbers and then annualized them over 6 years.


I guess the problem is, in 2008 silver etf did a 56% 8 month correction. On a leveraged basis that probably would have returned the 3x USLV ETF way back to ground zero and that would be a lost opportunity had you not captured gains before the correction.


IWM did a 31% correction in 2011 so the TNA got hit with a 72% drop.

Well to calculate the returns of TNA since 2009 price low I simply looked at the long term monthly price chart.

The 2009 low was 5.11

The 2015 June high was 99.


So just do a percent return calculation of those two numbers and then annualized them over 6 years.


I guess the problem is, in 2008 silver etf did a 56% 8 month correction. On a leveraged basis that probably would have returned the 3x USLV ETF way back to ground zero and that would be a lost opportunity had you not captured gains before the correction.


IWM did a 31% correction in 2011 so the TNA got hit with a 72% drop.

 

[clacy]

Leveraged ETF's will only be effective if your timing is right, but like any type of leveraged investment, if you're off on your timing/direction it can get ugly quickly.

The decay that many talk about has been over hyped IMO. There are a lot of badly constructed leveraged ETF's however.

If you invested 50% into SSO (2x S&P) and 50% into AGG (total bond market ETF) back in June of 2006 (SSO's inception date) you would have out performed SPY slightly, with lower volatility and slightly lower drawdown.

I personally believe that leveraged ETF's can be a good instrument for long term trades, but you need some of uncorrelated asset class to re-balance with. And of course you need to get your timing right.

It goes without saying that if you buy a 3x silver ETF and silver proceeds to be chopped in half over the next 1-2 years, your position will be in big trouble.

 

[bln]

TQQQ is up more than 1000% since bear market bottom in 2009. As others have mentioned timing is everything. I would not mind sitting on my ass doing nothing and tenfold my account in 4-5 years.

 

[clacy]

Green line is SPXL (3x S&P etf) vs SPY (blue line) dating back to April 1st, 2009, which is obviously cherry picked as it's within a few days of the market low. As you can see if your timing is right, the leveraged ETF can be amazing, and the decay is way overblown in the media.

 

[clacy]

50% SPXL and 50% EDV (zero coupon treasury ETF), re-balanced quarterly since 4/1/09. Gives you a smoother ride..... Portfolio is up 598.8% vs 200.1% for SPY. Also, had a higher Sharpe and nearly identical max drawdown.

 

[clacy]

As said previously, timing is everything. Here is AGQ (2x long silver). If you had bought on 9/1/2011 and held on, well...... let's just say you would be feeling some pain.

 

[murray t turtle]

I am thinking of a long term strategy of taking advantage of the new silver bull market that just started a few months ago.

I project this next leg of silver bull market should last 7 to 10 years. The bulk of the returns should be during the final 10% of the time. However I would like to take advantage of the first 90% of the move as well. The breakout to life time highs should occur near 2023.

So the question is, on the assumption that a new bull market trend has started, is it wise to repeatedly buy (dollar cost average) a 3X leveraged bull ETF (such as the USLV) on any significant price declines and then just keep holding it until the bull market peaks ?

The TNA ETF from 2009 low to high last year returned 1927% or about 19 times your money in a time frame of about 6 years. That is about 63% annualized gain ! That is not bad at all if you ask me given how tough it is to get consistent returns year in and year out. Now granted there were a few phases of that run that were highly volatile and scary. But those who stayed the course made out like bandits 6 years later.

Anyway, I will go ahead and answer the question myself. It makes sense to buy and hold and dollar cost average a 3x leveraged ETF only if you are 100% sure that a new bull market has started and that you are at ground zero.

Comments?

Trender48+ 49;
Well as long as you read the prospectus.Most of those run about 555 or 777+/ pages+ they keep the dividends, SPY pays the investor/ trader dividends.

Also, cant really figure performance from peak to valley %%[63%];
5 year TNA is 5.48%% or 5.49%%. I like cash silver; almost did buy USLV, for a medium term trade, but found something better. AS far as trying to trade TNA,most likely you may do better than USLV; but remember a market maker said 2,0 0 0 stocks are hard to hedge.............................................................................. good question.

 

[trc4949]

[QU
OTE="clacy, post: 4288240, member: 58732"]the leveraged ETF can be amazing, and the decay is way overblown in the media.[/QUOTE]


Yes it probably is overblown. But of course they have to push those disclaimers very hard for liability reasons. And it is definitely true that timing is absolutely crucial. As I was saying before a long term buy and accumulate strategy in leveraged ETFS is only suitable if one is 99% sure that the final low is in and a new bull market is starting. One really has to have a concept of where the stock or ETF is headed longer term and be very confident about that.

I would not mind sitting on my ass doing nothing and tenfold my account in 4-5 years.

Yes well I am in agreement about that. It continues to blow my mind how traders tend to over analyze and over complicate the business of making money long term in the markets. I have done plenty of short term trading but the reality is at the end of the year there is going to be a number in black ink or red ink and also in all the following years.

It is extremely difficult to product 30% annualized returns consistently for 5 or more years (or even 60%). And yet history has shown that this WAS possible with leveraged etfs IF bought at the right timing juncture. Of course in March of 2009, buying and holding a leveraged ETF was probably the LAST thing on everyone's mind. Instead most were thinking about the end of the world.

But this is not just about sitting on my ass and doing nothing. It is about doing something repeatedly... buying more when the price gets slammed down and continuing to buy more. I will only sell the entire position when I am sure the macro trend has reached its peak.

 

[trc4949]

My advice is don't do it. Buy silver yourself (with a vehicle that you are comfortable with) and just hold it. Do not buy and hold a leveraged ETF for long periods of time.

But if you know silver is going to go to a certain future price, why would you not want to maximize your return for the time and risk you are taking ?