 ThinkTek Hawaii, civil engagement lives here. This is Prince Dax, the Prince of Investing, coming all the way live from the beautiful state of Haluahua, Hawaii, via Denver, Colorado. Y'all like my new cup, huh? Thanks to my wife for that. How are you maybe catching this? I want to say thank you guys for tuning in, but as always, I don't have a lot of time and I definitely know you guys and girls don't have a lot of time, so we're going to jump straight into it. So today's video and topic is going to be about what are leveraged ETFs. Leveraged ETFs. What are leveraged ETFs? So before we can talk about what are leveraged ETFs, I'm going to talk about what are ETFs in general, what are leveraged ETFs and how they can be added to your portfolio to pretty much put your portfolio or your position or whatever you have on steroids. Then we're going to talk about advantages. Then we're going to talk about a disadvantage and we're going to talk about how they kind of work. All right? So let's stay tuned. Well, first of all, let's talk about what I said. We're going to talk about what are ETFs? What are ETFs? First, ETFs are an acronym for exchange-traded funds. Exchange-traded funds are exchange-traded funds pretty much, you know what a mutual fund is, or you heard of a mutual fund, it's like a mutual fund. It tracks a particular entity. For a prime example, you have all types of ETFs out there. You have ETFs that track oil, you have ETFs that track the retail market, you have ETFs that track the stock market. You probably heard me mention in the past, ETFs, you know, getting an ETF to track the S&P 500, you have ETFs that track indexes, all types of things. So what they pretty much are, they're pretty much, you know, how you have a basket, let's say the S&P 500. You don't have enough money to go and buy every stock in the S&P 500. I'm not speaking to everybody, maybe you do, who knows. But let's say you're like, hey, I don't have enough money to buy everything in the S&P 500, but how can I get some of the benefits and get some of the earns, some of the returns that the S&P 500 earns? There are certain ways to do that. You can do it via index fund. You can do it via mutual fund. You can do it via ETF. All the ETF does is it's passive. All it does is it just tracks the S&P 500. When the S&P 500 goes down, so does it. When the S&P 500 goes up, so does it. When the S&P 500 stay the same, so does it. Unlike a particular mutual fund, an ETF trades like a stock. When you buy a mutual fund, you have what you ended the day, the last year the day, but an ETF, it prices moves daily, depending on what this is tracking, what it is tracking. The defining difference is ETFs are passively managed. Meaning that there's no manager back there trying to beat the market or beat something. All it does is track something. For prime example, you may have something called like BOOG, B-O-O-G, that's Victor Oscar golf. Meaning this is the BOOG, Vanguard, S&P 500 growth stocks. So it picks out its growth stocks. Or someone picks out the growth stocks inside the Vanguard S&P 500 and it just tracks those stocks. So those are the things I like to look at when I look at, not a stock, but those are the things I like to look at. But it's kind of a general synopsis of what an ETF is. They still pay dividends. The expense ratio is usually pretty low, lower compared to a mutual fund. Because a mutual fund, you have a basket of stocks and you have someone actively managing them. They're buying, they're selling, they're doing this or whatever. Versus an ETF, it is just tracking whatever it's supposed to track. Hey, just track this particular index, track this particular industry, track these four or five stocks, that's it. So they have their way of, it's an easy way to be able to say, hey, for $200, I can get the benefit of the whole entire stock market. Versus just trying to get the whole entire benefit of just get the whole entire benefit of the entire stock market. Instead of trying to pay more fees, because try to pay more fees to a mutual fund, or like an index fund, you can buy and sell it relatively easy. And it moves up and down like a stock. So I hope that doesn't confuse you too much, but that's what ETF is, and it's change-traded fund, right? These big takeaways is it tracks something, it's a monitor, you know, you can do that, some P500, all type of things like that. But one of the big takeaways is it trades like a stock, it's passively managed, and it's a way to be able to get benefit of the entire industry with just a purchase of one particular security. So also thanks to education is dope. I think it's a local nonprofit raising five to eight zero on Facebook. So yeah, definitely thank them for the shirt, definitely appreciate it. Now, back to the topic. Now one of the things that they do is, now that's the S&P, I'm not the S&P founder, but that's the ETF and it's change-traded fund. Now we're going to talk about the advantages and disadvantages of an ETF. Some of your main advantages of a particular ETF is, you know, it trades easy like a stock, right? It trades easy like, hey, I can just go in, I can just buy something, I can buy something that tracks it. It kind of beats a mutual fund because a mutual fund has more fees associated with it in most cases. And, you know, I can buy and sell it. Those are two big things. Hey, I don't have to go in and buy every stock and S&P 500. I can do that via ETFs and be able to buy and sell it pretty fast, get dividends, all those great things, all right? That's the advantages, disadvantages of an ETF. One of the disadvantages I know of an ETF in particular with the S&P 500 tracking the ETF, I've been tracking the S&P 500, is every time you buy it, it's a fee. Every time you sell it, it's a fee. So a prime example, let's say every month I buy S&P 500, every month I buy the S&P 500 ETF to get some of the stock market returns. Every time I go buy that, you know, I know you have some brokers that does it for free, like you may have a robin to the other that has free trading or whatever the case can be. But most of them, like you trade it to your mere trade, most of the traditional brokers, they're going to charge you $4, $5 or $6 or whatever the case can be every time you buy and another $6 every time you sell. So if you brought this thing every single month, that little $6, add up, add up, add up, add up, add up, and add up, right? But when you look at something, when you compare that to a particular index fund, you can get a commission-free index fund, meaning that, like a prime example of S&P 500, you have SWPPX, which is Sierra X-ray Poppa Poppa X-ray. We're not mistaken, that's a symbol, but then it's Charles Schwab's index fund for the S&P 500. And what that does is every time I buy that, I don't have to pay a fee. Every single time I buy that, it's commission-free. So then the expense ratio is a tad bit lower than that of the ETF, right? So I get a tad bit lower expense ratio, meaning more money in my pocket, not into the broker's pocket, and it's no commission every time I buy it. So let's say you have one person who buys the index fund every month, one person who buys the ETF every month, and they're both tracking S&P 500. Let's say the person transaction fees are $5. Off of general, off of top, in one year, a person is gonna spend $60 if they brought one ETF every single month, or two ETFs, or whatever the case can be, because the transaction fee every month starts $5, times 12, that's $60. Two years, that's $100. Three years, that's $180. You guys can see just going to transaction fees, right? Versus the person who buys the index fund, they're getting the same returns you're getting, they're getting the same dividend check you're getting, but without the fees up front. So that's one of my biggest noticeable things when you're an index person, S&P 500. All new investors, I believe about 70%, 80% of your portfolio should probably be the baseline of your portfolio, because if you don't know this, I wanna get off into a tyrant, but over 95, 92, 95% of investors over time do not beat the S&P 500. Now, you can save room in there to go out and buy particular stocks, you can save some room there to get other things, but that's one of the logics behind that. One of the ways you can participate in S&P 500 without being part of the S&P 500. Another thing is, when you're talking about your, now that we're talking about what are ETFs, right? Then we talk about the advantages of ETFs. We spoke about the disadvantage of ETFs. Now we're gonna speak about what are leveraged ETFs with the whole topic you're supposed to be about. So let's get into what are leveraged ETFs. Now leveraged ETFs pretty much takes a position and puts you on, puts it on steroids. Let's say for a prime example, ETF. But ETF, on top of that, I spoke about high-tracks things. It can do the opposite of things as well. For a prime example, you know how you can invest in the S&P 500 ETF that tracks the S&P 500. You can also purchase an ETF that goes against the S&P 500. It shorts whatever you're trying to do. What I mean by that is as the S&P 500 goes up, this ETFs lose money. But with this, when the S&P 500 comes down, it makes money. So some people use these in a way to balance out or to hedge their portfolio. They know another market crash would happen. Even though right now, it doesn't seem that way. It hasn't happened in one, two, three years, right? I mean, it hasn't happened in like nine years. People was thinking about, hey, when is this crash gonna happen? But as yet, it has to happen. What are some ways you can hedge against your portfolio? You can do that with an ETF that goes against the stock market. So as the stock market goes down, it makes money. As the stock market goes up, it doesn't make money. You can make various positions. I mean that you're thinking the market will go down. Or you say, hey, where the market goes down? All I have is stocks. What is the way I can make money on a bear market or when the market goes down? You can do that through ETFs. That's what you hedge over time or whatnot. So now, a leverage ETF takes whatever you're doing and it puts it on steroids. Most of the time you have things like SPXL is a big one. Grab a little water here. My mouth is getting a little dry. And I want to show off my favorite coffee cup. Even though I don't drink coffee. But you can buy like SPXL. We spoke about, VOO, one second please. About that, a little water then caught up with my bro. Little wind pipe. But the thing about it is like we have the VOO which is the Vanguard S&P 500, right? To go against, you know, so S&P 500 goes up. VOO Vanguard goes up. It just tracks the S&P 500. Let's say if you want to leverage it. Meaning that you want to, you say, hey, well, right now I got Vanguard S&P 500 is only up about 6%. That, you know, that's not very great to me. So I want to get more into what is, you know I want to get a bigger bang for my buck. I really believe the stock market is going to go up. And, you know, how can I leverage myself? Now things you can do, you can buy calls against the market. You can do all type of things like that or whatnot. Leaps and calls and sales calls and sell puts, things like that. But one way you're going to achieve that is through a leverage ETF. For prime example, I challenge you to look up SPXL. Stanley, P as in Peter, X as in XL as in Lima. What this does is whenever the market goes up this goes up three times as much as the market. What this instrument does is heavy on fees. It's 1% and expense ratio. But you got to understand why it has 1% expense ratio because this ETF, they're pretty much buying calls and leaps and futures. They're doing everything to be so bullish on the market that it costs a lot of fees. When you're buying and selling calls and doing this, that's $5 here, $10 here, $20 here, $30 a high turnover ratio because they're betting the market is going to go up. So as the market, if the market goes up, like last year, the market went up about 20%. The leverage ETF went up about 60%, right? Now the same thing would happen on the reverse side. Instead of the market going up 20%, they said the market went down 20%. That leverage ETF is going to go down 20%, right? But this is something that I've been thinking about. Well, if you're a long-term on the market, if you're a person that's, hey, I'm a long-term person, I'm very long on the market over five, 10 a year, whatever the case may be, I'm bullish in a long term, how do you think that leverage ETF will perform over five, 10, 20, 30 years, right? So that's something that's a position you could think about. But what it does is it does the same thing. You can short the market. So as the market comes down, you can make three times as much money. So let's say, for a prime example, the market goes down 2%. Your short ETF could make 6%. Kind of catch my drift, it takes your position and it puts it on steroids. So if you're someone that is bullish, you think that the market is going to go up, you're going to make three times as much. It puts it on, it takes your position and puts it exactly, makes it even stronger. So it says that you got an FNP 500, it goes up 8% this year. The leverage ETF, it's going to go up 24%, right? So that's some, even though the fees are going to be way, way, way, way higher because a regular ETF, the fees are only like 0.04, but you're paying a whole, like someone who's paying 4% versus someone who's paying a whole dollar. But who cares if they're getting great performance? If the FNP 500 goes up 8% and someone makes, you're investing to make 15%, you probably won't care about paying a little extra in fees, bring you down to 12%, right? So let's say I had a portfolio manager and I told them, hey, beat the FNP 500. FNP 500 goes up 8% and FNP 500 goes up 8%. This person makes me 24% and they want to take 4% so I can have 20. Hey, you know what, that's not bad. So that's the thing I want people to understand. When you're looking at leverage ETFs, when you're looking at certain things, right? So they can be utilized to help hedge or to make your position even stronger. If you really be like tomorrow or by the end of the year, I know the market's going to crash, it's going to crash down to 15,000 points and the Dow Jones, I just know what's going to happen. I don't know the Dow Jones short leverage ETF, but this is an investment that you can make, awesome investment instrument that you can utilize to make your position even stronger, how you can make money off of a bear market and you can make your position two to three times stronger. All right? So I hope that kind of makes sense with some of this, most of them still pay dividends slightly lower to pay a little bit in dividends. Then they have a little expense ratio with it and the expense ratio is way higher. That's a disadvantage. The disadvantage is the high expense ratio and the extreme amount of risk you're taking if you're wrong. Let's say myself today, I went and brought, I think the market is going to crash or I think the market is going to crash. So I go buy a short leverage ETF. If the market continues to go up, not only am I going to miss out on the market returns, I'm also going to be paying, every day that thing goes up, I'm going to be losing more and more and more money on my shorts. That's something I want you guys to think about. All right? Leverage ETFs. So, but on the flip side, if you are a bullish person and let's say the market goes from 25,000 and it goes up to 26, crosses a new high, everybody else makes one to 2%, you can make three to 4%. That's the advantages and disadvantages of using the leverage ETFs. So we spoke about what are ETFs, the advantages of ETFs, the disadvantages of ETFs, what are leverage ETFs, the advantages of leverage ETFs, the disadvantages of leverage ETFs. So, hey, do your own research, don't take my word for it. I just want to spark your mind to think about something because education is most certainly dope. And that's all. But this is going to be a short episode of the day. That's going to conclude my topic for today. Thanks everybody for tuning in across the globe. And thanks everybody who's going to catch the playback, who's going to catch the, who's catching this over iHeartRadio, iTunes, all that other stuff like that. So be not following us. We are available on Apple iTunes, we're available on iHeartRadio, we're available on Spotify, we're available on SoundCloud, Instagram, Facebook, Twitter, you know, what the kitchen be. Get the audio experience if you want to, follow us on Instagram, follow us on Facebook and I tweet a little bit every now and then, Twitter as well. And most definitely here on YouTube, you can follow us as well at the Investa Show. So, without further ado, until the next podcast, video, or cart zoom, or whatever else you see me do, crazy around the globe. Peace, be safe, I'm out, thank you. I think I kind of love this cup. You might see this on every episode.