Why I added to my Leveraged ETFs position?
Added new money into leveraged ETFs. Let's talk why I think we are ready for a short term rip and strategy I am following to manage my leveraged ETF positions
INVESTMENTS
Open new M1Finance account (get cash): https://m1.finance/0ulBJlVUTwr9
Open new Robinhood account (get stocks): https://join.robinhood.com/rajivm23
View my Portfolio: https://drive.google.com/file/d/1_QMH...
SCRIPT
It’s feels like we are turning the corner. Worst might have been over for stocks. But then again, this year has been brutal. How many times this year we have seen 3-4% rallies only to make new lows the following week
Leveraged ETFs have been destroyed. You guys know I am a huge leveraged ETFs fan. Let’s talk what next for these crazy bunch of ETFs
Finally finally, we closed on a green week. We had 7 consecutive down weeks for the market.
Inflation could be easing. At least that is what the market wants to believe based on the PCE Price Index that was released on Friday
Walmart and Target sacred people off. But recent earnings from retailers like Macy’s, Ulta Beauty, Nordstrom and others lead us to believe, consumer is alive and well. Indeed some retailers raised future guidance
Feels like interest rates, geo political tensions, recession fears, all is baked in and market is looking ahead. Does that mean last week was the ultimate bottom?
I don’t know what I do know is that Nasdaq is still down around 25% and I like the recent price action. We finally had a green week
Here is my gut. And I could be totally off, looking at the how painful this year has been, recent price action and some historical data, more in these videos, I tend to agree.
A short term bounce is in the making. We closed strongly above the 10 day moving average for the market. The overall trend of course is still negative.
I do expect a decent second half. But I don’t think we should expect a v shaped recovery. If we end the year anywhere close to flat, that will be huge.
Volatility will persist but this is a year to accumulate your favorite stocks and ETFs. Personally, I dropped in some new money to work and also did few other things to manage my portfolio and take advantage of the sell-off.
In this video, I want to focus on leveraged ETFs. Talk about how they have performed relative to the market, what you should expect and moves I made to manage my investment in these ETFs on steroids
I am a huge fan of UPRO, TQQQ, TECL and SOXL. Depending on where we are in the market, they make 35-50% of my long term portfolio.
Let’s look at the damage - S&P as of today if off by 14% from it 52 week high, UPRO is down 40%, TQQQ that follows the QQQs is off by 64%, TECL 56% and Semis or SOXL by 66%
No wonder my long term portfolio is in a mess. For the year, I am down 28%. Thank you leveraged ETFs
It works both ways, you can amplify your gains when market is going North but it can allow destroy your portfolio when stocks go down. You need a strategy to manage these. More on this in a bit
So how do you deal will such massive moves. I have done videos on this but here’s the short answer, buy the dips at regular intervals and rebalance the rips when you investment in these ETFs hit a certain portfolio allocation
This was you minimize the actual dollar impact when the market drops and overtime you end up lowering your average cost
For me, I buy more every time Nasdaq drops 10%, 20% and 30%. Bigger the drop, higher the amount I end up investing. For UPRO, I track it to S&P drops
My upper limit is 50%. In a rising market, every time my Leveraged ETF portfolio allocation hits 50%, I tend to rebalance into non leveraged positions and lock in leveraged ETF gains.
And when allocation drops to low 30s, I tend to buy more. Depending on where we are in the market, I am around 35-50% of my long term portfolio in leveraged ETFs
First week of 2022, I rebalanced leveraged ETFs down from 68% to 38%. Since then I have rebought these when markets dropped 10%, 20% and recently 30%. Indeed I dropped a nice stash of new cash when Nasdaq breach 30%
Can it lower, sure it can but the way I see it, I got these at a 30% discount and my average cost is down big
Again, have a strategy that works for you and stick to it. Otherwise don’t invest in leveraged ETFs
The worst thing you can do is close your positions. As I keep saying buy the dips and rebalance the rips. That is my strategy. Make sure you have one before thinking about investing in leveraged ETFs.
Check out my leveraged ETF playlist if you have questions on how these work. Don’t let anyone tell you that leveraged ETFs are for day trading only
DISCLAIMER - I am not a Financial Adviser or Tax Professional, the information provided is my personal opinion and should not be considered professional advice.
#thinkfinance #leveragedetfs #buythedip