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/biz/ - Business & Finance

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203977 No.203977[DELETED]  [Reply] [Original]

What is the catch with UPRO?
(S&P 500 3x)

>> No.204046

read up on volatility and you'll understand

>> No.204048

They use leveraged funds.

>> No.204052

>>203977
The catch is 3x.

>> No.204069
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204069

In bull markets you make boatloads of cash.

If the market goes down you get rekt.

If the market is volatile you under perform the 3x benchmark. For example 2000-2014 has been volatile. If you were long UPRO at the top in 2000, you are still down 70% even though the S&P is at all time highs right now.

Pic related. Blue line is hypothetical UPRO back to the late 40s. Red line is the draw down from peak new peak equities. 0.7 = 70 draw down = 70% loss. As you see you have to stomach huge losses.

>> No.204173

>>204069
Wouldn't it still outperform S&P in a longterm investment for 10-50 years, because the S&P ALWAYS rises?

>> No.204231

>>203977
judging by that graph alone there is a possibility that you're too late and the upwards trend may be over

>> No.204340

Thanks goys, I understand now.