🦧 inverse, leverage, they don't care

what’s a leveraged etf?

here’s one: TQQQ 0.00%↑ (proshares ultrapro qqq)

• it’s one of the largest leveraged etf's

• the objective of this ticker is simple: tripling the daily returns of QQQ 0.00%↑, the etf that follows the returns of the nasdaq index

• "leverage", "3x", these are buzzwords we should be care about

  • sure, if we think the nasdaq index will go up today, we may get larger returns by trading TQQQ 0.00%↑ rather than QQQ 0.00%↑

  • but the same logic applies in the opposite direction as well

    • if you somehow turn out to be wrong and the index drops, by holding TQQQ 0.00%↑, you will lose (at least) 3x as much as QQQ 0.00%↑ would

there’s also inverse etf’s

such as: SDOW 0.00%↑ (proshares ultrapro short dow30)

• “inverse” because it moves in the opposite direction of the dow jones index

• this one’s actually leveraged as well, because it provides 3x exposure, meaning if the dow inches up 1% today, SDOW 0.00%↑ will plunge (at least) 3%

these are very risky

• no one knows if the market’s going up, down, or sideways, so it takes a huge risk appetite (and oftentimes irrationality) for an individual investor to take on lots of inverse and/or leveraged etf’s

• imo: these are only “wisely” used if one trades these as a tool for hedging short-term risk

nonetheless, money’s pouring into inverse and leveraged etf’s

• per morningstar direct, ~$25b has flowed into leveraged and inverse etf's this year, which is already above 2008's record-high $17b figure

• this year, a whopping 6.1% of the total net amount added to etf's are inverse and leveraged funds

  • the number was only 1% in 2021 and 2.9% in 2020

the more you look into inverse/leveraged etf’s, the more “loss porn” you’ll encounter… hope everyone stays safe and sound with their decisions!

💡 something im thinking about

bumble is open-sourcing its lewd image detecting ai tool (click image)

that's all, folks 🐒

as always, i’m no financial advisor! (i’m no substitute for professional financial services)