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POWERSHARES QQQ TRUST SENIOR 1 ETF (QQQQ) 43.44 red arrow -$0.22 (-0.50%) 02:46AM (15 mins delay)


Leveraged ETFs: A Decay Theory

Jul 13, 2009 - 7:15 AM EDT

Marco Hickey submits:

As posted on my blog July 11, 2009, after reading a lot of blog posts and comments, tweets on twitter, Facebook comments, and emails, I decided it was time to figure out if there was any real decay behind the leveraged ETFs, both long and short. I wanted to revisit this issue of the double and triple leveraged ETFs, and why investors should stay away from them, and to clear up some confusion. With the popularity of ETFs came these funds which use 200% and 300% leverage. Yes in any steady trend they can grow like weeds, but in a correction they will give back much of their gains. This is simple, and basic math.

First of all, these are extremely risky, and investors shouldn't hold on to any leveraged ETF(s) for the "long run", they are almost sure to lose money. These instruments are ideal for traders not investors!


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Source: Seeking Alpha (Jul 13, 2009 - 7:15 AM EDT)



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