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Originally Posted by bluejays
Wow. Huge and well appreciated explanation! Explains it perfectly. Some of which I should know but got muddled somewhere over time. I vaguely remember someone on here saying ETFs diminish over time so it’s of lesser benefit to hold them over the long term? Any recollection of what that may mean?
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There are leveraged ETFs that use derivatives to magnify the daily return on an index (often marketed as 3x bull or 3x bear sort of thing). However, because of path dependence and the fact that they rebalance daily, they have a natural decay over time.
These products are not investments in any traditional sense, they are designed for magnification of very short term moves. If you had a strong sense of what the Fed was going to say and wanted to
invest gamble on a short term move they are fine, but they are absolutely inappropriate for a holding period longer than a couple of days.
That is a small subset of ETFs though. Your normal index ETFs are great, have very low fees, and don't have any path dependence because they don't rebalance with any meaningful frequency.