Earlier I gave a list of some of my favorite ETF's. ETF's for those who don't know are Exchange traded funds which trade just like stocks on the New York Stock Exchange. The great thing about many ETFs is they allow you to leverage up to 3 times. This is great for day traders because it multiplies the volatility by three as well, allowing them to make quick swing trades several times during the day.
I want to argue that many of these 3 Times Leveraged ETFs will make solid short to mid term investments for those of you who have some minor risk tolerance as well as the patience both financially and mentally to deal with the ups and downs before cashing in. This is my arguement as well as some investments I'd recommend if you are feeling a bit riskier:
We all know that eventually the stock market will go back up from where it came from. This has been the case numerous times over the last 100 years and surely will be the case again. Once the economy shows that it is on solid ground, instead of the Dow being 8000 or so, it will start going back towards, 10,000, 12,000, 14,000 or higher. it may take a few years, but almost any economist will agree that it will occur. Now, what if you had the patience to wait that long, and could leverage your money by three times. This means that if you have $100,000 to invest, you can leverage it so that you can buy $300,000 worth of stocks. In effect this is exactly what the 3X ETF's allow you to do. My favorites are: (BGU) - 3X Long Large Caps, and (TNA) - 3X Long Small Caps. Basically this says that if you invest into either of these ETFS, when the large cap and small cap indexes go up 20% the ETF will rise #X's that, or 60%.
Now, think about this. The Dow is currently hovering around 8000. When it jumps back up to 12,000, say in 2 years or so (maybe sooner, maybe later) that equates to a 50% gain. If you invest into the above ETFs, you would be getting a 150% Gain instead. That means instead of turning your $100,000 into $150,000, you would turn it into $250,000. Hey thats not bad for a 2 year investment possibly. Having said this, you have to remember if the market goes down further you are goign to lose 3 times as much money if you sell.
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Only just read your article above you wrote in 2009. Well, I wondered if anyone followed your advice. They would be very happy they did.
I refer in particular to -
Now, what if you had the patience to wait that long, and could leverage your money by three times. This means that if you have $100,000 to invest, you can leverage it so that you can buy $300,000 worth of stocks. In effect this is exactly what the 3X ETF's allow you to do. My favorites are: (BGU) - 3X Long Large Caps, and (TNA) - 3X Long Small Caps. Basically this says that if you invest into either of these ETFS, when the large cap and small cap indexes go up 20% the ETF will rise #X's that, or 60%.
Now, think about this. The Dow is currently hovering around 8000. When it jumps back up to 12,000, say in 2 years or so (maybe sooner, maybe later) that equates to a 50% gain. If you invest into the above ETFs, you would be getting a 150% Gain instead. That means instead of turning your $100,000 into $150,000, you would turn it into $250,000. Hey thats not bad for a 2 year investment possibly. Having said this, you have to remember if the market goes down further you are goign to lose 3 times as much money if you sell.
Posted by Brian Krassenstein at 9:23 AM
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