Comments on: Don’t Buy a Leveraged Stock or Commodity ETF Before You Read This http://wealthpilgrim.com/leveraged-stock-and-commodity-etf/ WealthPilgrim.com -No Money Worries. No Matter What. Wed, 23 May 2012 02:40:46 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: What is a Master Limited Partnership and are they Safe? http://wealthpilgrim.com/leveraged-stock-and-commodity-etf/#comment-37724 What is a Master Limited Partnership and are they Safe? Wed, 07 Mar 2012 08:10:14 +0000 http://wealthpilgrim.com/?p=17744#comment-37724 [...] why there has been such an interest in buying MLPs through mutual funds and ETFs. The downside of buying MLP shares through mutual funds, however, is that the tax benefits [...] [...] why there has been such an interest in buying MLPs through mutual funds and ETFs. The downside of buying MLP shares through mutual funds, however, is that the tax benefits [...]

]]> By: Neal Frankle http://wealthpilgrim.com/leveraged-stock-and-commodity-etf/#comment-27040 Neal Frankle Tue, 03 Jan 2012 20:07:02 +0000 http://wealthpilgrim.com/?p=17744#comment-27040 I have also used DTN. It's very well balanced. I don't like a very focused commodity index. That is only good for people who really know that particular market. Thanks for the very informed comment. I have also used DTN. It’s very well balanced. I don’t like a very focused commodity index. That is only good for people who really know that particular market. Thanks for the very informed comment.

]]> By: Mark http://wealthpilgrim.com/leveraged-stock-and-commodity-etf/#comment-27039 Mark Tue, 03 Jan 2012 20:04:42 +0000 http://wealthpilgrim.com/?p=17744#comment-27039 Very good article Neal! I completely agree with you on leveraged ETF's. From personal experience, these have been some of the worst performing funds that I have owned in the past. I think the big kicker is that the 2X leveraged funds return 2X the DAILY value of the underlier. This means that even if the underlier moves in your favor, in a very volatile market, you can still end up losing money (try it out in Excel with up and down movements of 10% for the underlier and 20% for the leveraged fund to see the effect in a short time period). These funds are only good for holding periods of a few days if you're trying to bet on market movements. I think commodities will do very well in the long term, and I don't always want to own some of the mining, oil, and agricultural companies. Like you said some commodity ETFs have significant tracking error, which usually occur in contango markets. I use DJP for my commodity exposure, which is an ETN that has about 1/3 Energy, 1/3 Agriculture, & 1/3 Metals (Precious and Non-Precious) exposure. Being that it's an ETN, it won't have the same tracking errors as the ETF, but you have credit risk with the counter party that underwrote the note. Very good article Neal! I completely agree with you on leveraged ETF’s. From personal experience, these have been some of the worst performing funds that I have owned in the past. I think the big kicker is that the 2X leveraged funds return 2X the DAILY value of the underlier. This means that even if the underlier moves in your favor, in a very volatile market, you can still end up losing money (try it out in Excel with up and down movements of 10% for the underlier and 20% for the leveraged fund to see the effect in a short time period). These funds are only good for holding periods of a few days if you’re trying to bet on market movements.

I think commodities will do very well in the long term, and I don’t always want to own some of the mining, oil, and agricultural companies. Like you said some commodity ETFs have significant tracking error, which usually occur in contango markets. I use DJP for my commodity exposure, which is an ETN that has about 1/3 Energy, 1/3 Agriculture, & 1/3 Metals (Precious and Non-Precious) exposure. Being that it’s an ETN, it won’t have the same tracking errors as the ETF, but you have credit risk with the counter party that underwrote the note.

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