Replies to post #165 on The "Stock Trading Riches" Investment Sy

[Toofuzzy]

Hitffdo

>>> I have begun to think about a short term trading system utilizing 3x leveraged etfs.<<<<


The leverage funds will just get you in trouble. They don't work over longer time periods. They are only good for short term (day, week) bets. Investing should not be betting. They are derivatives of derivatives for G-Ds sake.

Check out www.aim-users.com for a non emotional way of investing. It is best used with funds in my opinion even if you lose some volatility. You also lose some risk that way.

Not always
Toofuzzy

[PraveenP]

Hi tffdo,

As Toofuzzy said, the leveraged funds are only designed for short term (day) trading, so they are not good for weekly or longer trading.

Compare the year-to-date returns of the profunds bull (SP500) with the ultrabull (2xSP500) and ultrabear (2x inverse SP500):

http://www.profunds.com/funds/bull.html
http://www.profunds.com/funds/ultrabull.html
http://www.profunds.com/funds/ultrabear.html

The bull YTD is -3.49%
The ultrabull YTD is -10.49%
The ultrabear YTD is -12.72%

As you can see, the longer term returns are not what you might expect because the funds are designed to leverage the daily movement, not the movement over time.

[PraveenP]

Running out of cash:

When I ran out of cash (which I did at the end of 2008 because of the big drop), I added more cash into the account.

I could not add enough to rebalance all my positions, so I followed the "triage" rule on page 24 of my book (5th paragraph), which is to raise more cash by selling off the worst performing stocks.

I think is it better to sell off some positions to make sure all remaining ones are rebalanced, then keeping all the positions and having them unbalanced.

This worked because I made a 44% return in 2009 (vs. 23.5% gain for the market).