Quote:
Originally Posted by schoy
Took a small position in FAZ yesterday, felt vindicated with the bank downgrades, and then today happens. At this point, I wonder if I should just ride it out or bail. I suppose I'll just let it sit LT.
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Careful holding 3X leverage funds for any more than a trade. These funds are dangerous for long term investors because when they go down hard, it's much harder to dig out of the hole. A 3X leverage ETF will not outperform an unleveraged ETF with extreme volatility (Like now). Reason being? If you are down 50%, you have to make 100% to get back to even.
Moral of the story: Don't become a shareholder of a 3X leveraged fund. If you are wrong, take your medicine because you'll be down 50% before you know it. You might ask yourself why a 3X leveraged fund won't always outperform and non-leveraged fund. If you don't know the answer, you need to get out or fully understand it before trading them anymore.