3 Rules for Investing in Leveraged ETFs

Looking to buy ETFs that offer magnified exposure to stocks, bonds, or gold? Before diving in head-first, Ron DeLegge, Chief Portfolio Strategist @ ETFguide explains how leveraged ETFs work. Ron also gives you three important rules for using these high octane funds. Take Ron’s Portfolio Report Card challenge and if you score an “A” you win $100! Go to http://www.etfguide.com/portfolio-report-card

Comments

1. Hi Terry, Buying a leveraged bullish ETF in a sector or asset class that is still bearish is like trying to catch a falling knife. We've had better success trading leveraged bullish ETFs that are in a bull market and levered bearish ETFs that are in a bear market. While it's true that trend reversals can deliver big returns, they are often proceeded by deep losses and inconsistent performance. Since leveraged ETFs are mainly designed as directional trades, we think they are best utilized for that purpose. Go to http://www.etfguide.com/newsletter for our latest open ETF positions and get text alerts. Thanks!
2. Since you never know the timing of reversal trends, what are your thoughts about getting into something when it's incredibly low, for example UWTI which was $30 last year and is now just $1? You might not hit the timing right, but even if you're wrong and it goes to 75 cents then a year later it's trading at $3, is that worse than waiting for an uptrend, (say 7 months later) buying in at $1.75 and 5 months later it goes that same $3? Who's better off then? The 1st scenario gives you a $2.25 gain though it took you a year to get that. The 2nd scenario gives you a $1.25 gain in 5 months.
3. up to 2 weeks? that's way too long.. the maximum you want to hold these crazy ETF's is 2 days..
4. Very excellent information.