tb1975

Why Leveraged and Derivatives-Based ETFs Are Dangerous

To be contrarian, I like leveraged ETFs and ETNs. Yeah, you can't invest in them and not look for a week, but with which investment can you do that with?

I own DGP. I've owned it since December '08. It is a 2X long gold fund. While gold has risen 13% since I bought in, DGP has risen 23%. Not exactly double, but not much slippage either.

I invested in it to get more return than GLD. It has done that. I also did it for tax reasons- since it is an ETN, I can hold it for a year and pay 20% capital gains rather than the gold 'collectible' rate.

I understand the risks involved. I understand it has to do with derivatives and a bank in Germany. I understand it was designed for short term trading. I don't care. I keep a close eye on it and it is making me money. I have limit orders in to protect profits. It's all good.