REIT strategy for retirement accounts
- Thread starter zubs
- Start date
Liar Loan
Well-known member
This is the meat of the article:
What many investors don?t recognize is that leveraged ETFs are rebalanced daily. Since leverage needs to be reset on a daily basis, volatility is your greatest enemy. This probably sounds strange to some traders. In most cases, volatility is a trader?s friend. But that's certainly not the case with leveraged ETFs. In fact, volatility will crush you. That?s because the compounding effects of daily returns will actually throw off the math, and can do so in a very drastic way.
For example, if the S&P 500 moves down 5%, a fund like the SSO should move down 10%. If we assume a share price of $10, the SSO should be down to about $9 after the first day. On the second day, if the S&P 500 moves up 5%, over the two days the S&P 500 return will be -0.25%. An unaware investor would think the SSO should be down 0.5%. The 10% increase on day two will bring shares up from $9.00?$9.90, and the SSO will, in reality, be down by 1%. It decreases a full four times the decline of the S&P 500.
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But if anybody would like to try their luck, I found a 2x leveraged mREIT fund that pays a 24.62% dividend yield.
https://finance.yahoo.com/quote/MORL?p=MORL&.tsrc=fin-srch
What many investors don?t recognize is that leveraged ETFs are rebalanced daily. Since leverage needs to be reset on a daily basis, volatility is your greatest enemy. This probably sounds strange to some traders. In most cases, volatility is a trader?s friend. But that's certainly not the case with leveraged ETFs. In fact, volatility will crush you. That?s because the compounding effects of daily returns will actually throw off the math, and can do so in a very drastic way.
For example, if the S&P 500 moves down 5%, a fund like the SSO should move down 10%. If we assume a share price of $10, the SSO should be down to about $9 after the first day. On the second day, if the S&P 500 moves up 5%, over the two days the S&P 500 return will be -0.25%. An unaware investor would think the SSO should be down 0.5%. The 10% increase on day two will bring shares up from $9.00?$9.90, and the SSO will, in reality, be down by 1%. It decreases a full four times the decline of the S&P 500.
---------------------------------------------------------------------------------
But if anybody would like to try their luck, I found a 2x leveraged mREIT fund that pays a 24.62% dividend yield.
https://finance.yahoo.com/quote/MORL?p=MORL&.tsrc=fin-srch
qwerty
Well-known member
From yahoo finance
SPY 5 year return is 10%
SPY 10 year return is 13%
SSO 5 year return is 16%
SS0 10 year return is 23%
Seems like it?s working to me
The article is correct but my point was you are better off over the long term in SSO vs SPY.
I tend not to do invidious stocks anymore and just do a mixture of SSO and SPY
SPY 5 year return is 10%
SPY 10 year return is 13%
SSO 5 year return is 16%
SS0 10 year return is 23%
Seems like it?s working to me
The article is correct but my point was you are better off over the long term in SSO vs SPY.
I tend not to do invidious stocks anymore and just do a mixture of SSO and SPY
nosuchreality
Well-known member
Liar Loan said:
A leverage, great on the upside and a nut punch in the blink of an eye.
You don't need to go that far back, just look at Dec last winter. First trading day of themonth you're feeling great its $115.98. Back up from that double dip to $100 right before Thanksgiving. Then its three weeks ofgroin kicks to $81 close on Christmas eve. Ho Ho Ho, Merry Christmas!
usctrojancpa
Well-known member
Thanks for the CIM recommendation Zubs...I've played around with it in my SEP IRA and personal trading account by selling covered out of the money calls and puts while collecting dividends.
usctrojancpa
Well-known member
momopi said:
[me=momopi]eyes thread title @_@[/me]
I don't really think it's a good idea to gamble retirement funds in very high risk / volatile investments.
Agreed that why my SEP IRA has mostly SPY and QQQ.
momopi
Well-known member
REIT's got slammed last week and I bought small amounts to play with. By small amounts I mean like I picked up 100 shares of MFA for $100.
Some of the limit orders were executed and others have not:
TWO
NLY
IVR
MITT
NRZ
RWT
MFA
PMT
DX
REM
Let me make it clear that this is not my retirement account, and I only spent about $100-$200 per stock. This is a slot machine play. So unless if you're willing accept the possibility that the investment will be worth less than toilet paper, don't buy it.
Some of the limit orders were executed and others have not:
TWO
NLY
IVR
MITT
NRZ
RWT
MFA
PMT
DX
REM
Let me make it clear that this is not my retirement account, and I only spent about $100-$200 per stock. This is a slot machine play. So unless if you're willing accept the possibility that the investment will be worth less than toilet paper, don't buy it.