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DaRick said:
Not what I've found in this environment TBH, as long as you don't invest too much too soon.

In a normal environment, you'd absolutely be mad to invest in it.
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How does the environment change the decay factor for an inverse ETF?
 
Taylor said:
I'm expecting significant buying opportunities to present as the year progresses. I'm more of a buy and hold forever sort of person, and I'd rather buy into the dividend returns with the buy in price as low as possible like I did with Woodside.
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What horses do you you have your eye on.
 

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Kram said:
What horses do you you have your eye on.
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I think the blue chips will wear a huge amount of economic pain potentially starting from as soon as Tuesday if the US wall into a default and across the general recession drama until September to November where it really falls over if bank failures track similar to GFC#1.

The six to eighteen months after that will be the opportunity to buy for long term hold. Something in the force tells me Westpac is the most vulnerable of all the banks so I'd probably only buy CBA, NAB, ANZ of those four.

If the likes of RIO, BHP, FMG reach their levels of the budget economic forecast iron ore price they will be good buys then too. I'm thinking FMG around $14 or so, RIO around 85 to 90, BHP around 38 to 40.

Biggest winners at the moment for me are the WA companies I've ridden for over three years. One gold miner in particular has done very well to hover around $2 a share and I bought into that one under 45c but I don't want to potentially influence any markers by saying what that little gem is because I think it's going to continue up to twice its current value when it starts paying a dividend.
 
DaRick said:
Wouldn't it rapidly rise in a bear market?

Unless you're referring to their relatively high fees.
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Not quite. Here's the long winded explanation.

In simple terms with an inverse ETF holding long term (i.e. more than a couple of days) exposes you to decay.
E.g. You start with $100 of BBUS that offers gains when the market goes down, and losses when the market goes up:

The market goes down 3% on Day 1 so your $100 becomes $103
The market goes up 2% on day 2 so your $103 becomes $100.94
The market goes down 3% on day so your $100.94 becomes $103.97
The market goes up 1% on day 4 so your $103.97 becomes $102.93
The market goes down 3% on day 5 so your $102.93 becomes $106.07
The market goes up 3% on day 6 so your $106.07 is now $102.83
The market goes up 2% on day 7 so your $102.83 is now $100.77.

After 7 days you've ended up back at basically your starting amount, with a 0.77% gain when the market has lost 1.218% overall, meaning you only realised 63.21% of the dip.

Contrast that with holding for 1 day where the market dips 3% and you realise 100% of the dip.

In a nutshell that's how decay works, and what it's a terrible idea to hold for more than a day or two. Fun fact, if you hold it for not that much longer you end up hitting a point where even a huge market downturn still leaves you with a loss. Whether you're in a bull market or a bear market makes no difference, decay treats all markets equally.
 
ash_1050 said:
Not quite. Here's the long winded explanation.

In simple terms with an inverse ETF holding long term (i.e. more than a couple of days) exposes you to decay.
E.g. You start with $100 of BBUS that offers gains when the market goes down, and losses when the market goes up:

The market goes down 3% on Day 1 so your $100 becomes $103
The market goes up 2% on day 2 so your $103 becomes $100.94
The market goes down 3% on day so your $100.94 becomes $103.97
The market goes up 1% on day 4 so your $103.97 becomes $102.93
The market goes down 3% on day 5 so your $102.93 becomes $106.07
The market goes up 3% on day 6 so your $106.07 is now $102.83
The market goes up 2% on day 7 so your $102.83 is now $100.77.

After 7 days you've ended up back at basically your starting amount, with a 0.77% gain when the market has lost 1.218% overall, meaning you only realised 63.21% of the dip.

Contrast that with holding for 1 day where the market dips 3% and you realise 100% of the dip.

In a nutshell that's how decay works, and what it's a terrible idea to hold for more than a day or two. Fun fact, if you hold it for not that much longer you end up hitting a point where even a huge market downturn still leaves you with a loss. Whether you're in a bull market or a bear market makes no difference, decay treats all markets equally.
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Thanks for the article; much appreciated.

How would you advise negotiating a bear market then? Just keeping money on the sidelines and waiting it out? Or putting it into money market funds/Treasury bonds?
 
DaRick said:
Thanks for the article; much appreciated.

How would you advise negotiating a bear market then? Just keeping money on the sidelines and waiting it out? Or putting it into money market funds/Treasury bonds?
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I'm not a financial advisor so unable to advise for your circumstances. For me if the strategy is to buy and hold for long term accumulation then I don't stress the paper losses, instead it's an opportunity to accumulate more at a reduced rate.

If I'm needing access to the cash in the next 12-24 months (e.g. I've got $100k and need it in 12 months for a house deposit) then it's better off sitting in the bank where in 12 months time it will be worth ~$104k due to the interest paid.

I'd recommend getting a copy of The Bogleheads' Guide to Investing, it's a pretty decent read that covers off on investing strategies in bull/bear markets and overall portfolio management. Excellent read to help provide reassurance when the portfolio forecast is a bit grey.
 
ash_1050 said:
I'm not a financial advisor so unable to advise for your circumstances. For me if the strategy is to buy and hold for long term accumulation then I don't stress the paper losses, instead it's an opportunity to accumulate more at a reduced rate.

If I'm needing access to the cash in the next 12-24 months (e.g. I've got $100k and need it in 12 months for a house deposit) then it's better off sitting in the bank where in 12 months time it will be worth ~$104k due to the interest paid.

I'd recommend getting a copy of The Bogleheads' Guide to Investing, it's a pretty decent read that covers off on investing strategies in bull/bear markets and overall portfolio management. Excellent read to help provide reassurance when the portfolio forecast is a bit grey.
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That's OK, I wouldn't expect you to do that.

I fully agree that you shouldn't invest money that you'll need promptly.

Thanks for the advice. I actually do have one of John Bogle's books; he's very big on index funds (which I do have some money squirreled away in). The only downside to them is limited diversity + liquidity.
 

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Kram said:
I don't have the market mentality to short anything but surely these bear funds could be used up to a few weeks not just a few days.
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It’s diminishing returns each day, the longer you hold the smaller the nominal return and the more risk you end up losing money, even if the market is down. If you run those numbers I posted above for another week or two it quickly gets very unappealing.
 
I’d usually go the opposite to the contrary.

People predicting recession and bear market. I’d assume the opposite will happen.
 
Kram said:
At best there is a load of big headwinds out there and broadly for mine the market is hardly 'cheap'.

We haven't really seen the real impact of all these rate rises yet..
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And I reckon there are more from the Fed that haven't been priced in yet...

Flog111 said:
I’d usually go the opposite to the contrary.

People predicting recession and bear market. I’d assume the opposite will happen.
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On that...





 
Kram said:
At best there is a load of big headwinds out there and broadly for mine the market is hardly 'cheap'.

We haven't really seen the real impact of all these rate rises yet..
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Warren Buffett has been a net seller over the past few months, that's uncommon.
 
US market is way overpriced.
NASDAQ keeps edging up.

Something will have to give.

I think BBUS is not such a bad option for an expert. My understanding is that the decay factor works over weeks rather than days based on Henry Jennings' explanation but I actually don't know for sure. Personally I wouldn't touch it.

I'm expecting ALL to keep climbing once US goes into recession.
 
Taylor said:
I'm expecting significant buying opportunities to present as the year progresses. I'm more of a buy and hold forever sort of person, and I'd rather buy into the dividend returns with the buy in price as low as possible like I did with Woodside.
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In a few months maybe retail, they've been sold off already but we should see some more big punches landed with bad reports coming through and then start buying.

I've got just one dog in Adairs and I suppose Wesfarmers is kind of with Bunnings. Almost bought JBH a few times over the years but never pulled the trigger.

Does anyone have any suggestions in the space they like?
 
Taylor said:
I'm expecting significant buying opportunities to present as the year progresses. I'm more of a buy and hold forever sort of person, and I'd rather buy into the dividend returns with the buy in price as low as possible like I did with Woodside.
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Agreed, unfortunately, I don't have the cash reserves to do this. In the past and hopefully, in the future, I normally buy into the dip.
 
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