A Shortcut With ETFs

A Shortcut With ETFs

July 24, 2024

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This week we’re looking at shortcuts.

Yes, discipline is essential.

Yes, we need to be in it for the long haul.

But that doesn’t mean we have to go slowly.

Why does everyone want us to go slowly?

In our last Newsletter, we looked at the difference between starting small/saving a little/investing in a mandatory index fund and starting small/saving a lot/investing in something that moves.

The difference? In the first case, $1,000 turns into $5,000. In the second, $1,000 turns into $423,000.

But that’s just one example.

Let’s say we started late and just learned about investing early in 2024. What would we do?

Well, we were sternly told there weren’t any shortcuts, so we smartly used an index fund. Thank goodness.

If we did that starting on 3/9/24, we would’ve hypothetically made money!

In that period, SPY is up 8%.

Or…

We could’ve again tried to use something that actually moves. Instead of an index ETF, we’ll use leveraged ETFs. Are they dangerous? Yes.

And so is riding a bike.

Bicycle Fall GIFs - Find & Share on GIPHY

Nonetheless, we’ll instead use a basket of highly-leveraged ETFs. Here’s how that has done in the same period:

The ETF basket has more than doubled the return of the SPY.

In other words, using the same amount of money, one method got to the finish line twice as fast as the other one.

Isn’t that the definition of a shortcut?

In our next Newsletter, we’ll look at another example.

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.