I need investment TIPS

Discussion in 'Stocks & Derivatives' started by copperhead, Oct 14, 2018.

  1. copperhead

    copperhead Active Member

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    Wile stacking remains a my main focus , about 10 months ago I discovered a stock App called Robin-hood
    I could not find any info that confirmed any one has been taken. This became my way to invest in stocks with Zero fees . Minimal investing amounts each month , has developed into a diverse portfolio .
    I try to mimic the same concept as silver stacking (but different )
    I pick companies at a low point
    Companies I feel are relevant in services
    Companies that are not start ups ( a few tho)
    I eyeball it in relation to finances of the company
    ------------------
    So the help I need is
    It was only a matter of time when I'd want to invest in silver or Gold ETF's
    Term's like 2x 3x -2x -3x not sure what it means
    I realize these ETF's follow the market .
    Some claim they are backed in gold. Some not .
    Do they go belly up on people ?

    It seems complex
     
  2. SlyGuy

    SlyGuy Active Member

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    Don't do it. Those are amplified return funds. They are also called "triple short," "double long," etc.

    If an ETF was a 3x S&P 500 ("triple long S&P 500"), it is meant to do 3x what the S&P 500 index does daily. If S&P goes up 1.5% that day, the ETF should be up 4.5% (same is true in reverse: index down 1% = fund is down 3% roughly). The funds might be close to their goal for a single trading day, but they will not be very accurate over a month or even a week since the fees eat up so much of the money.

    The inverse ones are exactly what it sounds like. An energy index 3x inverse ("triple short energy") would try to do triple inverse of its index. If energy index was down 2%, the ETF should be UP by 6%.

    ...I would advise you to stay the hell away from these for multiple reasons:
    -very high fees (these ETFs use a lot of options and shorts to try to attain their goal daily, so fees are very high... you also buy/sell them frequently, so more trade fees)
    -they are absolutely not accurate long term (graphs will tell you this, and their description even says they aren't intended to be held more than one trading day)
    -they frequently aren't even accurate in the short term (again, the funds are designed to do that double or triple... they frequently won't attain it)
    -they just aren't necessary for commodities (commodities are volatile enough that you can have high variance just buying when you feel an uptick and selling when you predict a slump)

    If your investment site is somewhat reputable, they probably don't allow transacting in these (or require special permissions) anyways? These funds are a scam designed for people who basically want to "short things" and essentially trade options and margin (largely dumb ideas but beyond the scope of this convo) yet don't have the money or time to learn. Like options and margin, these amplified ETFs are a fast way to take market risks, pay high fees, and lose money. On the bright side, at least you can only lose what you start with. On the dark side, you will probably lose nearly everything to bad guesses... and/or to fees in the long run.

    If you are dead set on doing this, do yourself a favor for a month: write down each evening if you think the price of gasoline will be higher or lower at noon tomorrow. However, you must lose 10% to begin with. For example, if you said, "up," and gas is up 10cents, you only get 9 cents credit for that day. If you said "up," and it's down 20cents, you lose 22 cents credit. If you say "down," and it's down 5cents, you get 4.5cents credit. Add up all of the days at the end of a month's time. With that exercise, you can keep your money and see how nonsensical it is, how fast the fees eat you up, and you will have an idea how the game works (and that's not even amplified or inaccurate like the market ETFs would be... that's only 1x long or 1x inverse guessing on gas prices).
     
    Last edited: Nov 6, 2018
    barneyrubble, JulieW and sgbuyer like this.

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