Excellent primer on leveraged ETF’s here. A must read for anyone who is a frequent trader of such products. In my opinion, these products are dangerous not only for the reasons generally reported (time decay for example). They are dangerous because it is difficult, if not impossible, to manage risk around such a volatile instrument. Money management & position sizing are difficult in such a volatile environment. There is a reason why casinos prefer high limits and fast action. The volatility makes it difficult for you to manage your money. These instruments are no different than a roulette wheel in my opinion:
Source: NERA
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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