RE: Trying to understand Santa Hurt post about leveraged ETFs[Eng-Spn]
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nice blog and thanks for sharing. I just wonder a thing regarding matter in leverage ETF explanation.
What we must keep in mind here, if I'm not mistaken, is that this "loan" isn't free: the fund charges daily interest. Therefore, if the market goes up and down without a clear direction, you end up losing money even if the final price remains the same. It's a tool for getting in and out quickly, not for waiting patiently like with traditional savings. This has its advantages and disadvantages. The main advantage is the multiplier effect: if the market moves strongly in your favor in a single day, you earn three times more than with a normal investment. The disadvantage is that you will have lost money simply because losses multiply as quickly as gains.
The 3x multiplier is fixed in the gain? please don't see me as a negative person looking for trouble. I am just another guy that still new in this financing world.
Hi, I'm also learning, and what I've been able to research during my post regarding the question is that the multiplier is fixed daily, but in the long run, the final result can be very different from a simple '3x' due to compound interest and operating costs. That's why, as you mentioned, they are precision tools for quick trades and not so much for 'buy and forget' strategies.
with hReplier
So it is not a fixed '3x' multiplier.. thanks for clearing