Marc Gerstein

Why You Shouldn't Hold Leveraged ETFs Long-Term

I believe the point of the prior comment is that your insight, so to speak, is not at all new. This has been a hotly and vigorously debated topic for quite some time, on major web sites including Seeking Alpha, among regulators, among investors, etc. Readers today expect that if someone states this conclusion, they ought to be offering some novel insight. Here, on the other hand, you didn't even address the minimum basics.

Leveraged and Inverse ETF Providers Now Face Lawsuits: When Will It End?

Anybody want to guess whether plaintiffs' lawyers are being paid on a contingency basis? I suspect not. :-)

Leveraged ETFs: Is Tracking Error Really So Troublesome?

12 months....wow!!!!!!!! I'm sorry but when I glanced at that, I didn't even bother to read the rest of the comment. If someone does that and gets burned, who cares. It's the equivalent of someone deliberately chopping off his own hand and then trying to blame the axe manufacturer. It's absolutely and completely unreasonable to even discuss holding these day-oriented leveraged ETFs for a year.

Check my subsequent study: seekingalpha.com/artic...

We all know (or at least are supposed to know) that one day is the proper holding period if one wishes these ETFs to perform as per the label (double or triple). We also know that investors cheat ... they hold longer than a day. That study looks at how long one might hold before making a total mess of his/her portfolio. Based on that data, it seems to me that even 60 trading days is probably too long. I tend to build models based on 20 days and have been getting good results. Others may disagree and prefer shorter limits.

But a year . . . please . . . spare me. I don't have the patience to argue that one ought not use an axe to chop off one's own hand and i don;t have the patience to argue that one ought not hold a day-oriented leveraged ETF for a year.



On Apr 23 10:27 AM User 305589 wrote:

> sorry, but this is nonsense. you will lose money big time the longer
> you hold xETFs. For instance, over the past 12 months, if you had
> bought FAS and FAZ which are supposed to be just inverse on a daily
> basis (one 3x bull, one 3x bear) you would have lost 93% on the one
> and another 35% on the other. Free money for the creators of the
> ETF. a huge empty bag for the buyers and holders of this crap.<br/>

3x ETFs Are Wealth Destroyers

These things definitely are designed to track daily benchmark movements. But depending on holding period and the nature of the path from start to finish, there are many scenarios under which they can be held for more than a single day. I presented some data here: seekingalpha.com/artic...