I hope you know what path dependency is.
There are reasons why you don't want to have leverage >1.5 in the long term. 😘
There are reasons why you don't want to have leverage >1.5 in the long term. 😘
•
55
•
3Semana
@PowerWordChill That's why I say a small speculative admixture in my portfolio. Of course, I don't want such an ETF as a core.
••
@Max095 I don't think I got my point across.
The expected value at 2x leverage is slightly negative.
You could just as easily go to the roulette table for 1x the money.
It's probably even more fun and you might even get a free drink. 😅
The expected value at 2x leverage is slightly negative.
You could just as easily go to the roulette table for 1x the money.
It's probably even more fun and you might even get a free drink. 😅
••
3Semana
@PowerWordChill Okay, so where does the annual return of over 30% per year come from, and that for 20 years?
••
@Max095 Survivorship bias!
You look at the USA and see 2x would have worked well.
And now look at the same thing twice with other countries. In most cases, it didn't go so well.
You do realize that you can lose money with such products due to volatility even though the market is rising, right?
There are quite good studies on the subject:
https://www.slcg.com/files/research-papers/Leveraged%20ETFs,%20Holding%20Periods%20and%20Investment%20Shortfalls.pdf
Just as an example, try to find one that comes to the conclusion that it is a good idea to keep such a product for longer than a few months.
Just because there have been a few markets where it has worked in the past does not mean that it is likely to work in the future.
I'm not trying to talk you out of it, you can do what you want with your money, I just wanted to point out that there is a consensus that it's not a good idea.
There is actually an optimal leverage that is somewhere between 1.25 and 1.5 but 2 or more is too much. 😘
You look at the USA and see 2x would have worked well.
And now look at the same thing twice with other countries. In most cases, it didn't go so well.
You do realize that you can lose money with such products due to volatility even though the market is rising, right?
There are quite good studies on the subject:
https://www.slcg.com/files/research-papers/Leveraged%20ETFs,%20Holding%20Periods%20and%20Investment%20Shortfalls.pdf
Just as an example, try to find one that comes to the conclusion that it is a good idea to keep such a product for longer than a few months.
Just because there have been a few markets where it has worked in the past does not mean that it is likely to work in the future.
I'm not trying to talk you out of it, you can do what you want with your money, I just wanted to point out that there is a consensus that it's not a good idea.
There is actually an optimal leverage that is somewhere between 1.25 and 1.5 but 2 or more is too much. 😘
••
3Semana
@PowerWordChill Les mal leveraged for the long run
••
3Semana
@PowerWordChill MSCI World etc. are all over 80% USA. Then, according to your statement, one should not invest in these ETFs either.
•
11
•@Max095
1. i think we're talking past each other.
2. i'm afraid you don't know how the product works.
Can you answer the following question:
If the MSCI USA Index makes +10% in one year, how much % does the Amundi ETF 2x Leveraged MSCI USA Daily UCITS ETF make ?
1. i think we're talking past each other.
2. i'm afraid you don't know how the product works.
Can you answer the following question:
If the MSCI USA Index makes +10% in one year, how much % does the Amundi ETF 2x Leveraged MSCI USA Daily UCITS ETF make ?
••
3Semana
@PowerWordChill Anything can happen? Depending on the performance during the year, even a total loss?
•
22
•@seppl6431 Correct, you can't predict it.
The path dependency can work for or against you; it has worked well over the last 15 years. But if you had held the ETF between 1990 and 2008, it would have been disastrous. The dotcom bubble + financial crisis would have totally destroyed the performance.
Total loss would only occur if the underlying index also went to 0. 😅
The path dependency can work for or against you; it has worked well over the last 15 years. But if you had held the ETF between 1990 and 2008, it would have been disastrous. The dotcom bubble + financial crisis would have totally destroyed the performance.
Total loss would only occur if the underlying index also went to 0. 😅
•
22
•3Semana
@PowerWordChill well, a normal ETF would also have had a "disastrous" result in this period ;)That's why you don't just hold securities for 18 years, but longer.
••