Author Topic: leveraged etfs under performing in a bull market. Why?  (Read 976 times)

muscleman

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Re: leveraged etfs under performing in a bull market. Why?
« Reply #10 on: January 10, 2020, 09:24:23 PM »
thanks for the explanation, muscle. This might sound silly but if you bought and sold it everyday (sell at close and rebuy at open), would you then get the 3x? I'm assuming the adjustments are made at night. Obviously, it wouldn't work out perfectly since the market doesn't reopen at the same level but I wonder if it would work out well enough.
I think they can only trade near the end of the market close to adjust the leverage to maintain 3X. The name is 3X daily which tells you that they adjust daily.
The tax consequences is insane. I would not consider it unless in my tax deferred account.
I am muslceman. I have more muscle than brain!


stahleyp

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Re: leveraged etfs under performing in a bull market. Why?
« Reply #11 on: January 11, 2020, 03:22:40 AM »
yeah Stevie and muscle, I was wondering about trying to get the annual 3x by doing that so thanks.

Also, how are the taxes different on this? Like, if you buy UPRO and hold for a year, it's not a regular long term gain?
Paul

muscleman

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Re: leveraged etfs under performing in a bull market. Why?
« Reply #12 on: January 11, 2020, 07:44:19 AM »
yeah Stevie and muscle, I was wondering about trying to get the annual 3x by doing that so thanks.

Also, how are the taxes different on this? Like, if you buy UPRO and hold for a year, it's not a regular long term gain?
No. Buying ETF is not much different from buying a mutual fund. The index ETFs are different because they don't actively trade, though when they do, you still get some additional forms to fill.
For active ETFs, it is just like investing in an active mutual fund.
Think about it this way: If you can buy an active ETF and enjoy long term gain, then why don't you launch an ETF yourself and put all of your money into it, and actively trade it yourself, and enjoy long term gain? That's an obvious tax loophole if it works. It doesn't work that way.
I am muslceman. I have more muscle than brain!

stahleyp

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Re: leveraged etfs under performing in a bull market. Why?
« Reply #13 on: January 11, 2020, 07:47:08 AM »
yeah Stevie and muscle, I was wondering about trying to get the annual 3x by doing that so thanks.

Also, how are the taxes different on this? Like, if you buy UPRO and hold for a year, it's not a regular long term gain?
No. Buying ETF is not much different from buying a mutual fund. The index ETFs are different because they don't actively trade, though when they do, you still get some additional forms to fill.
For active ETFs, it is just like investing in an active mutual fund.
Think about it this way: If you can buy an active ETF and enjoy long term gain, then why don't you launch an ETF yourself and put all of your money into it, and actively trade it yourself, and enjoy long term gain? That's an obvious tax loophole if it works. It doesn't work that way.


good points. I had assumed that these would be taxed like ordinary index etfs but I can see why that's not the case now. Thanks!
Paul

stahleyp

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Re: leveraged etfs under performing in a bull market. Why?
« Reply #14 on: January 11, 2020, 09:27:46 AM »
wow the results for the emerging markets 3x are horrendous.

For roughly 10 years, EEM averaged 7.64% vs ECD (3x) 2.39%.

Max drawdown of EDC was 87.48% vs 32.71% for EEM. crazy!

Now, if you do the 33% EDC and 67% EMB (bonds) that combination returned 9.37% (with a slighly lower max drawdown).
Paul