A.I.M. Users Bulletin Board

[ls7550]

Hi Tom. RE leverage

As you know I'm a keen user of leveraged ETF's. Prefer to hold 50/50 in 2x/cash rather than all in 1x.

Example

In the UK Investment Trusts are more common than ETF's. Stocks that solely trade in stocks. Many are just closet index trackers where the alpha they add is lost in management fees, but with differences. Such as at times they're priced to premium/discounts to NAV so you might try and time such. They also have the flexibility to scale - maybe at times being 80/20 stock/bonds, at other times maybe 120 stock (leveraged). 100% stock is just a figure, at times it maybe more appropriate to be 110% long stock/whatever. And as you note times of real leverage can be relatively short.

In using/holding leveraged ETF's that better ensures you can continue using them. Much negativity has been directed towards retail holdings of leverage and barriers have been instated. Each time I trade for instance I have to jump through hoops first - that exempts the provider from losses that may arise.

Fundamentally when trading it just boils down to shifting half as much 2x capital value as 1x otherwise indicates.

Also tends to get you looking more at the return on 'cash'

For example 33 in each of stock/gold/bonds as a 'cash' proxy.

Regards. Clive