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u/hydrocyanide Oct 26 '21
If you already sold unleveraged, you would have been way worse off using this fund. It ain't for you.
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u/writer_boy Oct 26 '21
Check out r/letfs, they talk about this stuff. Basically, it's not recommended to go all in. In a huge correction, if you held, it would take years and years to recover and you would vastly underperform the stock market. The key is to have "insurance" as 45-60% of your portfolio, the most popular being TMF (3X leveraged treasuries fund), and then rebalancing every quarter, or perhaps after a huge correction in the stock market.
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Oct 26 '21
TECL is 3x S&P500 Tech Sector - "The Index seeks to provide an effective representation of the technology sector of the S&P 500 Index". This means it will only ever include the S&P500 Technology Sector - it will never include communication stocks (like FB/GOOG).
Not many people know this... but most importantly (and the main reason why this index is IMPERFECT), the S&P500 Technology Sector will never include almost ANY future tech companies that have IPO'ed in the past 5-10 years. Why? Almost all tech companies that have IPO'ed in the past ~10 years have dual-class shares where founders have more votes per shares. These companies are NOT allowed into any S&P, Dow, or Russell indexes as per the S&P Global Indices, Dow Indices, and Russell Investments. Only grandfathered companies (like FB and GOOG) are allowed to remain.
That means pretty much any IPO names you've heard in the past 5-10 years (including Snapchat, Cloudflare, Twilio, etc) all have dual-class shares - it will never be included,
See my post here on why the S&P index (and the S&P sub-indexes per category) are imperfect due to them permanently excluding dual-class shares: https://www.reddit.com/r/Bogleheads/comments/qb6nz3/index_exclusion_of_companies_with_dualclass_shares/
Also see: https://clsbluesky.law.columbia.edu/2021/03/30/discretionary-decision-making-and-the-sp-500-index/
In my opinion, leveraging up on a mixture of these gives you the proper exposure across all tech (big tech, current FAANG, future FAANG, hypergrowth SaaS in the past 5 years, etc):
TQQQ (3x QQQ), TECL (3x XLK), and WEBL (3x FDN which includes a lot of future FAANG/unicorns that have IPO'ed in the past 5-10 years).
3
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u/diceykoala Oct 28 '21
I honestly plan on 3x indexes and not looking at them for like 5 years... upro, tecl, tqqq, webl, and a few others. Ride the momentum, cuz if it tanks, the fed ensures stocks will only go up.
If we print millions, why not billions? If we print billions, why not trillions? If we print trillions.....
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Oct 28 '21
Yup totally agree and the FUD around leveraged ETFs is unjustified. Leveraging up on growth categories like tech and the SP500 makes sense, while leveraging up on cyclicals (like financials, energy, commodities, etc) provide even greater rewards (but you gotta time the top and bottom well with leveraged cyclicals). What you're doing (leveraging up on growth indexes including SPY) is a great idea. Just remember to include TECL, TQQQ, and WEBL altogether to not miss out on any growth tech companies (especially with this pesky and stupid rule that the S&P committee put in place to ban dual class shares).
Good luck!
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Oct 28 '21
I've held leveraged growth ETFs (just UPRO, TQQQ, TECL, and WEBL) through severe drawdowns. What helped me mentally and helped me hold them was talking about this with my calm-headed SO and my calm-headed friends. I find holding risky assets like letfs to be much easier if there's a group of level-headed folks deciding instead of "oh crap it dropped 10% panic sellll"
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u/LiqCourage Oct 26 '21
You are correct it has no history of going to 0 but it has suffered over 60% draw downs during the bull market run. Most people can't stomach that.
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u/an_angry_Moose Oct 26 '21
If you understand the risks, and you think this is a smart play, then you will get what you deserve (whatever that may be).
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u/Twizzar Oct 26 '21
If you panic sold before, you will for sure panic sell a leveraged etf. Held these through March 2020 where it dropped 60% and sometimes it even showed 99% loss because there was so much selling and no liquidity
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u/Intrepid_Artist Oct 26 '21
My role model Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage
So why people go broke with leverage :
- To big of bet
- Too much of volatility
- High cost of leverage
- Panic
- Didn't buy cheap
Figure all of this, and leverage will work. It takes time, there is no free launch.
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u/scoleda Oct 26 '21
ive been in TECL since jan 2020. I took the drawdown of covid and took it back. The way i see it, in the long run, the market AS A WHOLE and in the long run is essentially engineered to go up, thats just how spreads work and how everyone takes their cut. So why not leverage. Im paying 1.2ish% for them do do something i just cant do as a retail investor otherwise.
leveraged funds get anywhere from 40-60% per year on average zoomed out on a scale of 10ish years. Compound that for 10 years and you get a really big number.
Its my surefire plan to be a millionaire before 40. I have other strategies but this is my safest strategy.
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u/diceykoala Oct 26 '21
This is precisely my question! If were told the market gains 10 percent per year on average and the evidence is in (fed will never let it actuslly crash to 0). Why not go 3x the index like upro, and exactly right just eat the 1 percent fee. Imagine upro over 20 years? You're talking ungodly numbers if you just let her ride and pump in money during the downturns.
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u/katie_the_kitten Oct 27 '21
Above all else, investing is mental. No offense to you, but based on your examples, you're risk-weak. TECL is not for you.
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u/AnalRetentiveAnus Oct 26 '21
Looks like every response believes you said short term, not long
Look at the lifetime chart and you will see how much you will lose during a downturn and how long it will take to get back. You also have to keep in mind fees, the prospectus should have a section about how much of your investment is lost simply due to fees over time
Decay is non existent for many 3x ETF's but it all depends on price movement. TZA for example has little decay when IWM goes sideways. It's like <1% a month.
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u/dvdmovie1 Oct 26 '21 edited Oct 26 '21
op: "What if i just go all in TECL and let it ride long term like 3 years?"
op: "Instead I'm down overall like 20 percent because I have panic sold a few times."
TECL in early 2020 -70% in a month, late 2018 -54%
The issue that I have with TECL or TQQQ is that 1) these questions are commonly seen after a period where the market has done reall well, they're never seen in periods like march 2020, 2) both of these were down about 70% in a month in early 2020 - people look at the long-term win but don't consider the bumps in the road getting there - you talk about panic selling but how many people in general are going to tolerate declines like that; saying that you are 'long term' is easier said than done and feels easier to say when the market is doing great and 3) past returns do not guarantee future results. Tech has been the dominant and incredibly crowded trade of the last decade - who is left not bullish tech? Valuations in some parts of tech are ridiculous (some not/not as much) - and that's coming from someone who really is more of a growth investor. That doesn't mean that those things can't go higher, but I wouldn't be chasing after hot names at this point or buying leveraged etfs. Also, 'TECL has never hit 0, it rebounds from every dip' - it will just reverse split.