anybody thought of loading up on some DDM for the long haul? it's 2x the Dow. I am worried about tracking errors, however from looking at a comparison with DDM to DIA it does seem to track it pretty much ok, although there's a lag. I'm also worried about capital gains distribution issues, dividend issues. I've never tried holding one of these 2x ETFs for the long haul before.
I'm confused as to why any professional trader would watch the DJIA at all. An obsolete & irrelevant 'index' of just 30 stocks, I removed that shit from my screen sometime last century. SSO would be a much better double-weighted representation of the overall market.
I would not hold for the long haul. These are not buy & hold funds - however a leverage point of 2x is fairly reasonable as long as you don't buy on margin. Are you thinking about buying DDM as a percent of your portfolio and holding for a quarter or are you thinking going all in and taking a hail mary?
I'm thinking of taking a large position as an investment for 1 - 5 years. i know people say these double ETFs are not for buy and hold. but comparing the DDM chart to DIA for the past couple years, the DDM does correlate, albeit imperfectly.
point well taken. Sure the S&P 500 gives you much broader exposure to the overall market, but sometimes you don't necessarily want that. There's a lot of crappy companies in the S&P 500. I see the DIA as sort of a quick and dirty filter for what passes as "blue chip", more stable stocks nowadays. Although what constitutes a blue chip, or if they even exist at all anymore, is of course debatable.
I have been telling friends and family since October to buy DDM anywhere below $30. Some listened and bought it a little below $30 and sold it a week or two later for a more than 30% return. But you shouldn't buy it on margin because Dow will probably touch 7K in the next 6 months and you don't want a margin call. And make sure you are able to hold it for a 5 year investment. I would buy the Dow over the S&P because the Dow usually recovers from a recession faster than the S&P.
leveraged ETFs with daily targets are self destructive because of compounding. You should not ever consider them long term investments - recommending to friends and family to buy & hold for a 5 year time frame is not what the products were intended for. These are actively traded funds/shares that are marketed and sold as short term, market timing instruments. You should never invest a large portion of anything in any one thing (long term). Also people should never consider leveraged ETFs with daily betas for long term investments. Compounding will crush your assets. This is wrong to even discuss or entertain the idea of it. It is not what the products were intended for.
I agree with you. These instruments you speak of are not for the general public in my opinion. They are tools used by professional speculators and hedgers, not buy & hope. As for the other guy who recommended to the friends and family who made their 30% trade - that's a one off event. Your sample base is too small. They likely would not be able to reproduce that trade. In fact - you know what guys, I'm going to go ahead and say alot of the public shouldn't even be in the stock market right now. The potential risks right now are too great.
How can you hold a 2x leveraged position for the long haul? If it falls 50% then you are busted out, and you will get a margin call even earlier. If you are only committing a certain % of your funds, then you don't need leverage in the first place so a 2x ETF adds no value and costs the extra fees & borrowing costs in the fund. If the ETF does not go <$0 when the underlying falls 50%+, then it will also not track perfectly on the way up either.