Comments on: Current Investing & Trading Environment (video)

By: mash2018

mash2018 — Fri, 16 Nov 2018 23:40:18 +0000

I read the FAQ regarding the decay of leveraged ETF. It can cause major problem when the overall market drops 33% or more, theoretically speaking after a 33% drop in QQQ, SQQQ probably will lose 95% of the value. However, losing 95% of your 33% leveraged allocation will be very rare and even in such scenario, you will still have 67% that should do okay to offset some of your losses. You may end up with 28% – 30% loss for that year assuming bonds and gold will somewhat behave inversely with the fall of the market. Below are 2 ways to minimize this risk that the leverage ETF will get absolutely smacked during a fast market dive.
1.) Only use leverage broad market ETF when the overall bench index is above some kind of EMA, this is to ensure it is in a uptrend.
2.) Use some form of re-balancing to your overall portfolio either quarterly, 6 months, or yearly. This way it can spread some of your gains made from the leverage ETF to other allocations during good times and also replenish the leverage ETF during bad times so that it will have adequate fuel when the market bounced up.
I am seriously thinking about using the following allocation for my $200K portfolio. This should solve one of my biggest headache which is NOT able to fully utilize my trading capital. Like you said in your videos, the overall allocation of a portfolio is much more important than any particular trade. I would love to hear your thoughts when you get a chance to think it through.
33% UPRO – Captures as close of the 100% of Market Return as though I had invested all my funds in SPY.
20% TLT, – A hedge against market drop, source of funding from bond Yield for future investment during portfolio re-balance.
5% GLD, – Hedge against Armageddon when dollar tanks
20% Swing Trade – Utilize the Gang from this platform to hopefully generate some market beating returns. Note, this will be the only portion where I can play the short side.
22% Long Term Bets – 7 – 10 Stocks that I like to hold from a long time, I will increase this number to 15 – 20 when my portfolio gets bigger.

By: Dean Drummond

Dean Drummond — Fri, 16 Nov 2018 18:13:15 +0000

In reply to mash2018. Sounds logical & I might have to think it through a bit more to identify any potential pitfalls although one consideration to make is the decay factor suffered by leveraged ETF when held for an extended period of time. Please see the FAQ page (located under Resources on the menu bar at the top of the site) under the ETF related questions sub-category. Also, note that the 3x leverage can & will produce gains OR losses in excess of 300% or 3x what the underlying index does. Again, how & when that works is explained on the FAQ page but the most important thing to that is the fact that while bull markets are a slow back & forth grind higher, bear markets are usually much swifter & more unidirectional.

By: mash2018

mash2018 — Thu, 15 Nov 2018 03:18:14 +0000

Randy, after watching the Asset Allocation portion of this video. I have a weird thought that I want to get your opinions on. Assuming that stocks over time will tend to go up, why wouldn’t everyone simply buy 33% of their portfolio with a broad market ETF index such as the TQQQ, its expense ratio is 0.95% which is still reasonable. This way it is almost guranteed that we will at least get the market return of the broad market for that year. However, because we only used 33% percent of our capital, we still have 66% that we can deploy to improve our return. We can allocate for example, 25% for TLT, 5% to GLD, and 33% for Swing and Short Term trading. Basically my main point is that as long as market over time tend to go up, we should use leverage to achieve as close of a market return as we can and then use the extra capital left over to hedge (bond and gold) and utilize swing trading (long and short) to add to our market return. Let me know what your thoughts are on this subject, it seems logical but since I am farly new to trading, there might be hidden risks that I am not aware of. Thank you in advance for any insights you can provide.
David

By: dmel

dmel — Wed, 14 Nov 2018 12:11:08 +0000

nice video,end of day updates really help,keep them going, thanks

By: jst20946

jst20946 — Wed, 14 Nov 2018 02:12:33 +0000

Randy – Like today’s video…Quality over Quantity…and sometimes less is better.