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Strategies & Market Trends : Value Investing

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To: Dr. Ipsofacto who wrote (44308)	9/12/2011 12:40:08 AM
From: geoffrey Wren	Read Replies (1) of 78751

I believe the 3x funds are only short term (e.g. a day) well-correlated to the indexes they track. Expenses are high and the correlation does not hold up even in the season-to-season time-frame. I do recall a study saying the best long-term investment approach was to be about 115% invested (meaning 15% into margin), but that always made me wonder. It would depend on the rate. Margin rates are so high relatively for your average investor. If the rate were low and you loaded up on dividend paying stocks it might make sense. I believe some closed end funds issue a slight amount of preferred shares that pay a fairly low coupon so as to get a little leverage. If I could borrow 20% of my portfolio value at 3%, I'd be tempted to do so. But I can't, so I sit tight. If you want to be aggressive, go 100% stocks, and load up on micro-cap value stocks. That's probably a 2 beta, so you'd do well so long as stocks did not go into a Japanese style long term doldrums.

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