Leveraged ETFs - Share Dealing

[Ronnie_R]

My First post. Go Easy please!

 

I am just a year into my trading experience. With no lump sum to start simply relying on monthly investments from my small business income. As I am late to the party in terms of age I have figured out a reasonable 12-year plan running up to retirement.

 

So with that background I need to be as expansive as possible, not just safe-investing and hedging, but also going out-there to the riskier edgy side of things to try and create a capital pot.

 

I have noticed there are a number of 2x and 3x ETF products out there. Some appear to be specifically very short term instruments according to their issuers, others appear to erode and possibly self destruct. But some I can't figure out at all... In particular the Vix products. I like many believe that volatility must and will return at some point in the future. maybe next year, maybe in three. I don't really care when so long as its sometime within the next 12!!. From what I can figure out Volatility is historically low and unlikely to drop much more, so I have punted a small amount in a couple of the VIX products in the last few weeks.  Vix dropped even lower today and I am so tempted to buy even more but have already decided that VXX might be permanently non responsive in comparison to the 2X alternatives out there.   I'm looking for an opinion on this.. Is it likely that a 2X ETF fees would erode an investment faster than the VIX market is likely to return. Are these only very short term instruments or can they be punted for a year or three?

 

Thanks for your opinion.

[Caseynotes]

Hi ,  Good post on a very interesting subject, the vix affects all markets because of it's direct relation with the S&P 500 and you are right that it has been averaging low for some time now and seems to be settling into a new normal but still prone to spikes on very bad and very good news. I've dug out this from 'The Motley Fool', I caught this last month and may be of some interest to you.

 

https://www.fool.com/investing/2016/08/22/dont-use-vix-etfs-to-bet-on-volatility.aspx

 

[JamesIG]

Hi  Welcome to Community and congrats on your first post. Very insightful and hopefully the wider community will be able to help going forwards. 

 

Based on a couple of things you've said I thought I should just add a comment and maybe direct you to some places within the IG eco system you may find useful. Academy maybe a useful resource, especially the parts which focus on trade planing and risk management. 

 

You may also like out News section on the Investments page. It's specifically aimed at share dealing and longer term investments stuff, so it's probably worth a read. 

 

Finally the IG Live video section may also be interesting. I've included a video below. 

 

 

All the best, and if you have any questions just shout. 

[Ronnie_R]

Very much appreciated thank you. I shall read it.

[Ronnie_R]

Thank you, I have gone through some of those resources previously and do continue to do so. I have found it quite a steep learning curve and have noticed that mistakes can be instantly expensive... !