oleg850
Active member
Yesterday I mentioned I would do a post demonstrating how terrible of a long term investment vehicle NUGT/DUST are, so here it is. I have attached 5 year weekly charts of NUGT and DUST. The earlier prices have all been adjusted for the multiple reverse splits that these ETF's are routinely subjected to. Taking one glance at the chart, you can see that they are nowhere near linear inverses of one another, and are both subjected to some serious time decay bleed. Using the raw numbers to calculate % gain/loss, buying NUGT at its debut on 12/6/2010 (at $1963.5) and holding through present day ($46.39) would have resulted in a net loss of 97.6%. Conversely, buying DUST at its inception on 12/6/2010 (at $20.24) and holding through present day ($36.50) would have resulted in a paltry gain of only 80.3%. That's a bleed of 17% in less than 3 years. Also, consider the timely debut of this ETF pair, when the media was pumping up gold as the asset that could not depreciate. Interesting that less than 9 months later, gold started down a major correction and fell into a bear market. Something to consider if you find yourself taking on large positions in these ETF's or are hesitant to sell an underwater position for a loss. Unlike conventional un-leveraged stocks or ETF's, these trading vehicles are unforgiving and do not have the virtue of time on their side. It is possible to hold a conventional stock or ETF long enough for it to recover and become profitable, (hence the effectiveness of buy and hold investing). It is nearly impossible to accomplish this feat with leveraged ETF's such as these. In the seldom case that i do trade these vehicles, it is always for short periods of time (less than a month) using only very small position sizes (less than 5% of total available capital).
Food for thought..
