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Finally, leveraged ETFs are preferable to margin, for long term?
- Thread starter crgarcia
- Start date
If you bought the equivalent ETF (or its individual shares) on portfolio margin to leverage 3:1 you would have gotten a margin call (posibly even owing money to the broker).Quote from LongArm:
Right, if you had bought the FAS/FAZ pair last November, you'd be down only about -83% by now. No big deal, eh?
What you prefer 17% left, or losing-it-all/owing money?
What about the option of not using leverage at all?
Quote from crgarcia:
If you bought the equivalent ETF (or its individual shares) on portfolio margin to leverage 3:1 you would have gotten a margin call (posibly even owing money to the broker).
What you prefer 17% left, or losing-it-all/owing money?
Uhmmm.... how about not holding a highly leveraged instrument for a long time through while losing money? And while we're at it, how about trading with size that is appropriate for your account? If you're getting margin calls, you don't have a clue what you're doing.
Quote from crgarcia:
With leveraged ETFs you are preventing blowup (margin call), since the index would have to go down 50% or 33% in a single day.
The "time decay" or "leverage trap" is overstated by greedy brokers, who want you to margin your accounts.
Didn't the last 2.5 years teach you anything about the dangers of leverage?
Quote from crgarcia:
For those who decide to use leverage, leveraged ETFs are far safer.
You can reduce exposure, placing only a third of your account (thus only risking about 30%) in a 3X ETF.
In reducing your exposure you are adding a lot of risk.
33.3% of equity in a 3x ETF
IS NOT EQUAL TO:
100% of equity in SPY
grab a prospectus and figure out how the leveraged ETFs actually work...