A.I.M. Users Bulletin Board

[ls7550]

You need to have LOTS of cash available for the drops in price

Hi Toofuzzy

Only ever de-scale them, half in 2x as much as you'd have invested in 1x. A third in 3x ... etc. Excepting for relatively short periods (maybe weeks/months). For example they're handy for when you want to adjust stock exposure but 'cash' is otherwise tied up for a while - perhaps in a fixed rate/term bond (CD) that might be maturing in a month or two. If you've for instance $8,000 of 1x stock exposure and want to increase that to £10,000, then sell $2000 of 1x and buy 2x with the proceeds.

You have to rebalance back to target weightings periodically in order to maintain closer tracking. For 2x you can get away with yearly rebalancing. For 3x perhaps 6 monthly rebalancing. For 5x you should perhaps be rebalancing quarterly or maybe even more frequently. AIM however can manage that and provide reasonable indications of when and how much.

Regards.

Clive.

PS - a annoying feature with TDDirect over here (UK's TD Waterhouse) is that you have to complete a questionnaire before trading to confirm you're a sophisticated investor. Even if you're selling existing holdings. Get it wrong and its a 28 day delay period before you can re-try, so you'd have to resort to more expensive telephone trading. I have emailed them about that saying it was daft to apply that when selling shares that you already hold ... but after a couple of tries I got nowhere, more or less customer service staff that I suspect are provided with prompts with which to reply. They're being bought out by a smaller outfit over here (Interactive Investor), so I might be switching those accounts over to another broker, but giving them a fair trial first as you never know, the smaller firm might have a bit more sense.