These Stocks Will Beat The Stock Market By 3x In 2021? - YouTube

hey guys how's it going it's Andy from Magoo  investing happy Friday the past couple weeks  

I’ve been talking about a lot of stocks and  if there's any stock you guys would like me  

to go over in a future video be sure to leave  it in the comment section down below so I can  

get my creative juices flowing over the weekend  and plan a week full of videos for next week so  

a couple weeks ago I got a comment asking me  to talk about leveraged etfs and for those of  

you that don't know leveraged etfs are an etf  that follows a certain stock index security it  

just follows something and it moves two three or  even four times what the underlying stock does  

and so it's a way that you can make a lot  of money very quickly especially if you  

have something that you have a lot of faith  in and so in today's video I’m going to be  

talking about uh the important things to know  about trading leveraged etfs talk about some  

of the risks associated with them because a lot  of people think that buying into leveraged etfs  

aren't that risky if you're just following the  overall market and are a way to triple your money  

in just a single year and I’m going to talk about  my history trading and leveraged etfs and how I  

ended up losing 75% of my portfolio around two  years ago and some of the lessons that I learned  

from that and that will include me hopping on the  computer and talking about some important things  

to remember if you are going to be trading these  etfs so before getting started I do have to say  

that I’m not a licensed financial advisor and  this is not financial advice anything you hear  

in this video is just me giving my own opinions  on the stock market and you need to do your own  

research before making any investment decisions  also if you've been enjoying these videos really  

appreciated with the like and subscribe button  as would help my channel out a lot with that  

out of the way let's hop right into it and talk  about leverage etfs are they good are they bad  

should you consider buying them in the future so  let's get right to it so leveraged etfs sounds a  

little bit too easy so we know that on average the  stock market returns around 10 a year for the past  

century at this point so if you're going to be  buying into a triple leveraged etf that follows  

say the Nasdaq wouldn't it make sense that it  goes up 30 when the overall market goes up 10  

that makes sense to me and then you think 30  a year and then you hop on to a compounding  

interest calculator you put in that you're going  to be investing a thousand dollars a year for  

42 years until you retire and then it says that  you're going to retire with 325 million dollars  

sounds perfect right the problem is there are some  complicated things that comes with a math for etfs  

that makes it so it's not as surefire of a way of  tripling your money because if it was that easy  

everyone would be doing it why would you just buy  into a an etf that follows the market when you can  

follow one that is going to triple your money and  so the math that makes it so it doesn't follow the  

annual returns is the fact that these leverage  etfs follows the daily move of whatever it's  

following and not the annual return so even though  the stock market on average returns 10 a year  

the etf isn't going to triple that number it's  going to follow the daily move and on average  

it's not going to be three times for example  let's talk about the tech heavy Nasdaq that's  

had an incredible 2020 so far at this point it's  up 39 on the year and the three times leverage  

bull etf which is $TQQQ which is going to be the  one I’m going to talk about a lot in today's video  

is up 94% on the year which is you know very  good it's almost doubled so far in this year  

but it's not the same as the 117 percent you'd  expect if it was following the actual annual move  

and so the math that works out for it  is that it's the daily move and so a 10  

%move on one day does not equal a 10% move on the  other day it's not the same thing as a 10% move  

up equaling the same thing as a 10% move down it's  not something where you can just add them together  

as the price changes a 10% move is different on  a different day and so I found this graphic that  

kind of illustrates how that can change over  just a couple days and so the whole idea is  

that you start with a hundred dollars in an index  and a hundred dollars in a triple leveraged etf  

the first day you get big news the index falls ten  percent so now the money that you had in the index  

is now worth ninety dollars and since we have a  leveraged etf it becomes a 30 move down so you  

end up having 70 left in the leveraged etf that  makes sense it's triple whatever the daily move  

was now we get to day two the news was reversed  and you have a jump of 15 now the index is up  

five percent from where it started but instead  of multiplying that by three and having a hundred  

and ten dollars and fifty cents based off of  what the actual index looks like for the past  

two days you're up only one point five percent  total because it is three times of that actual  

move and the ten percent move even though it  looks like it's going to be smaller than the 15%  

move that we just had it actually has weighted  more because the index was higher before that so  

from day two you are down compared to just  following the actual index and you see that a  

lot there are some examples that I’ve been finding  recently following gold where even though gold is  

actually up for the past couple days and it's  actually outperforming the triple leverage etf  

this is an example of the intraday move is super  important for what these leverage etfs do when you  

get to day three and you have a five percent move  the index is down one point five percent compared  

to the etf that is down almost 14 so this is an  example of volatility for a long term position  

for a leverage etf usually means tough times so  from this example in just a couple days the index  

is down one point seven percent but instead of it  being three times that it's actually significantly  

more and so instead of being down one point seven  percent you're down 14 percent uh in just a couple  

days and this is called decay and it's something  that you see a lot with these leverage etfs  

and it's a reason why I’ve always kind of stayed  away from leveraged etfs for the past couple years  

because even though it makes sense that you know  the stock market goes up 10 a year a three times  

leveraged etf puts you at significantly more risks  than pretty much anything else in the stock market  

an example that I saw this had to do with oil if  you remember back in April the crude prices fell  

down below zero dollars for the futures and it  made sense that if you thought crude was going  

to recover to buy into a leveraged etf because  you know crude's going to have to get back up to  

where it was and at this point it has recovered  significantly it went from being at zero dollars  

and currently it's at 46 dollars a barrel  and so the three times weighted bull etf $UWT  

is an etf that's down 96 on the year because that  crash at the beginning was so significant that it  

made it so it was pretty much worthless it is now  a penny stock and since it's recovered it hasn't  

really done that much to the triple leverage etf  so while it made sense that oh I’m going to buy  

into a triple leverage etf that's going to recover  when oil does it's not the same thing these are  

not the type of investment that I would look at  for a long term play and so the type of people  

that would do very well trading these leverage  etfs are the swing traders that are looking for  

maybe a couple days or even just one day because  the longer you hold this the more likely that the  

etf that you're following is going to decay and it  becomes pretty much worthless a lot of the triple  

leverage etfs that I used to trade just back  at the end of 2018 have been de-listed because  

they decay by so much that they're pretty much  worthless and as I’ve talked about in the past  

there are certain requirements for being  listed on the new York stock exchange  

and one of them has to be a price over one dollar  for the previous I think it was like 90 days  

and so at this point $UWT was trading for like  50 just a couple months ago and now it's pretty  

much worthless and so you can get around that by  having stock splits but this was one of the ways  

that I ended up screwing myself over and I lost  75% of my account because I bought into a three  

times weighted etf that followed natural gas and  so natural gas spiked uh I think was like the end  

of 2018 and it spiked to an unusually high level  and I was like oh it has to come out of out of  

the sky it's going to have to come down eventually  so I bought the bear three times etf that would do  

well if the price of natural gas fell the problem  was is it kept going up for a little bit and then  

it kind of stayed flat and at that point my etf  had decayed by so much that it was pretty much  

worthless it got to the point where I was doing  more harm than good just kind of waiting to see  

what would happen it's called bag holding where  you just you're holding on to something that's  

just decaying and value and you're just hoping  that eventually something good is going to happen  

and you're going to be able to get your money  back you're not thinking about profits you're  

just thinking about getting your money back and  I got into this mindset where I was just like you  

know what at this point what's losing 25% more  and that's just a horrible mindset to be in and  

so from that experience I’ve learned kind of some  risk management because I put 100% of my portfolio  

into this three times weighted etf because I’d  always thought that when you're young and you  

have just not that much money on the line I think  I was only investing with a thousand dollars I was  

like you need to be aggressive because that's how  you really grow your portfolio the problem was I  

put all my eggs into one basket I lost and I lost  a lot of money but I learned from it I think that  

losing at the beginning of your investing career  is one of the best things that can actually happen  

to you because even though I lost I guess it'd  be 750 I learned so much from that time about the  

emotions of stock trading I learned that it's not  good to be super greedy I was like oh it has to  

fall out of the sky this seems like a no-brainer  play and I was wrong and so anytime that you have  

overconfidence and you're thinking oh this seems  too easy you should probably run because it's  

probably something that you don't fully understand  leverage etfs do look good on the surface and at  

this point the only leveraged etf I would ever buy  is going to be $TQQQ because it does follow the  

market that on average does go up but if you're  going to be following something like a crude a  

gold prices silver natural gas the volatility  is so high and it can just spike or crash in one  

day and it can screw you over of a lot of money  whereas the stock market you know it does crash at  

some points but we have seen that the leverage etf  has recovered this year but the longer something  

stays low if we had a stock crash back in march  where it crashed and it stayed that level for the  

entirety of the year the etf would have decayed  so much we've been pretty much worthless at that  

point you're not going to lose 100 of your money  immediately but just the risk is so much higher  

that I don't think that buying a triple leverage  etf for a long-term investment is ever going to be  

a good idea the only time I would ever buy one of  these is if I felt very good about maybe some news  

coming out maybe I thought the vaccine news was  going to come out relatively soon and I could buy  

it for a week or so and see what happened but I do  want to hop on over the charts and kind of explain  

something important to know that if you are going  to be buying these leverage etfs because this is  

one of the mistakes I made at the beginning I love  Technical analysis I love looking at the charts  

and I thought I had a very good play set  up because of what I saw there but there is  

something very important to know about trading  these leveraged etfs if you're ever going to  

consider buying in based off of a technical  analysis so let's hop on over there and I’ll talk  

about what I saw on the charts and how I ended up  screwing myself at a 75% of my account all right  

so here's something that I wanted to show off  for this leveraged etf this is $TQQQ which is the  

three times weighted Nasdaq etf and so something  I always like doing on this channel is technical  

analysis and tech analysis just shows how you  can predict future price movement based off of  

what's happened in the past so if I was looking at  this and this is just a normal stock I would say  

oh it's got a little bit to go until it hits this  resistance so I would not sell if I was trying to  

make a short-term swing trade on it so right now  it looks good it looks like it has room to go to  

the upside but the problem with leveraged  etfs is that they're not traded by itself  

it is following something else so while it looks  like there's still room to go before you hit the  

resistance at the top the thing that it's  following which is the future enqueue you can  

see that it's already past that resistance so it's  important to remember that if you are going to be  

trading these for short-term plays to remember  to make your decisions on the etf based off of  

what it's actually following and not based off of  what the charts for the etf actually looks like  

because based off of what $TQQQ looked like it  still had room to go to the upside before hit that  

resistance but as you can see here the way I would  have charted this is already past that resistance  

and so it's just important to know what you're  trading and not get caught up in what you see on  

the charts for the etf because I have made this  mistake before trading leveraged etfs on natural  

gas where I bought into the etf because I thought  it looked really good and I kind of forgot that  

it followed something else and I ended up losing  a lot of money the story that I just told about  

being down 75% so yeah just important to know  what you're trading and what charts you're looking  

at and what's actually important from the data  so overall leveraged etfs are very interesting  

way to play the stock market however I think it's  too much risk for most people the people that are  

going to do very well trading these leverage etfs  are ones that are going to be day trading are just  

swing trading for just a couple days because decay  is such an important part of these leverage etfs  

that if you're not careful if you hold on for it  to too long the decay is really going to catch up  

and you're going to lose a lot of money so this  is not something that I would ever put 100 of my  

portfolio on because I have and I lost a lot of  money and I’m never going to do that again but  

leverage etfs are very interesting I think  that a lot of people kind of find out about  

them and get really excited because it makes  sense you know the stock market returns 10  

on average so triple that then you go to  compounded interest calculator and you're  

going to have 300 million by the time you retire  but there are safer ways to invest in the stock  

market and still have fantastic returns but I  think leveraged etfs are not a great idea for  

a lot of people going into the stock market  so let me know if you have any experience  

trading leveraged etfs and let me know what  stock you guys are watching going into 2021  

thanks for watching these videos I appreciate  all the support and I will see you on Monday