Microcap Speculator

3x ETFs Are Wealth Destroyers

Ryan,

You asked re what tool I would use to gain exposure to a specific sector. That would depend on the sector. For example, if it was the tech sector I would probably use either 1x ETFs or Nasdaq futures but at well under the permitted leverage. If it was something more granular, like homebuilders, I would use either a 1x ETF or if I wanted leverage, an option spread on a 1x ETF or sector leader.

The point of my article was not that sector bets, or even leveraged sector bets, are bad. I only aimed to demonstrate how poor the 3x ETFs are as tools to make extended leveraged bets.

It is true that the companies admit they are not designed for overnight use. They also admit that there will be tracking errors. However, a lot of HNW investment advisors are currently pushing those tools as a means of making a long-term leveraged market bet.

I hope that I have addressed your question. If not feel free to shoot me an email or comment on my blog (I follow those a little more closely and will respond more quickly).