|
I think that as long as we avoid a 30% gyration in the next 10 years, it might be a good fund choice. The problem with such a fund is that it is designed to get 200% of the gains and 200% of the losses. A loss factors more into the final return than any gain, due to basic mathematics. It is more of a trading vehicle than an investing one.
Loss 25% of $1,000 = $750
Gain 33% of $750 = $1,000
If you had a loss of 50%, you would be left with $500 instead. If you had a 66% gain, it equals $830, thus your result is you have 17% less than if you chose the single variable.
Thus, I don't like ultras but if you want to put 5% of your portfolio into one of them, it won't matter as much. I say this because I don't think the risk/reward is any good on them. You could miss out on a mega up-swing whereby instead of doubling your money, you triple or quadruple it and I helped you miss out on that extra return. However, due to the past performance of how the fund works, I don't believe holding these more than a week makes any sense. These are truly speculative trading vehicles and that's all! Try to convince people who endorse these products, however, as it is like talking to a brick wall.
As of Feb 1, 2007 (not enough time to draw adequate conclusions), UYG dropped from $72.2 to $2.98, a loss of 95.87% leaving you with 4.13% of your initial investment. The XLF equivalent lost 76.2% ($8.85 / $37.17) in the same time period. The S&P lost 42.5% (826.84 / 1438.06) whereas the SSO lost 75.3% ($21.84 /88.41). I think you can make a decision as to whether it is worth the risks. The short vehicles did okay. The SKF was up ($145.53/$68.60) equals 2.12 times better and SSO was up 40.2% ($79.99/57.05).
|