Time to invest in leveraged long oil ETFs?

[oilnoobie 0]

Hi all - newbie here.  I don't trade futures so wondering whether to go long these oil ETFs:  https://www.etftrends.com/etfs/commodity/oil-etfs/. (sorted by worst performing YTD)

I understand the leveraged funds may not perform eg. 3x due to contango, but given a 15 year horizon, eventually they will recover, right?   What am I missing?  Seems too good to be true. 

 

Thanks. 

 

[Jay McKinsey + 1,489]

Let me introduce you to Volatility Decay: https://realmoney.thestreet.com/investing/ets/the-impacts-of-volatility-decay-on-leveraged-etfs-15259644 😲

[oilnoobie 0]

Thanks @Jay McKinsey!  So for the average investor, is a non-leveraged fund like USO a better way to go?  Or is there another vehicle?

[Jay McKinsey + 1,489]

All my oil trading is short term in leveraged ETF. Something I don't like are ETFs that include companies as well as oil proper. Just adds unnecessary variables. 

According to Investopedia USO also has long term risk. https://www.investopedia.com/articles/markets/081116/uso-good-way-invest-oil-uso.asp 

[oilnoobie 0]

Thanks @Jay McKinsey.   Any recommendations for how an average investor can go long oil assuming a long term horizon? 

[Jay McKinsey + 1,489]

Sorry, I don't

[Mattia Mori 0]

On 4/12/2020 at 4:39 AM, Jay McKinsey said:

All my oil trading is short term in leveraged ETF. Something I don't like are ETFs that include companies as well as oil proper. Just adds unnecessary variables. 

According to Investopedia USO also has long term risk. https://www.investopedia.com/articles/markets/081116/uso-good-way-invest-oil-uso.asp 

Hi I'm a newbie in oil trading: do you have any opinion on Wisdom Tree WTI crude oil fund?

[Gregory Purcell + 94]

On 4/11/2020 at 9:47 PM, oilnoobie said:

Any recommendations for how an average investor can go long oil assuming a long term horizon? 

 I am invested in Gazprom, they have a very low extraction, and delivery cost,  so I don't care  which way the price of oil goes, when it goes down they will gain market share, when it goes up they will do great.      

Also the Russian Government is a dividend investor, and they wanted all companies they own 51% of, to pay out 50% of profits in dividends.  Gazprom is wrapping up a huge capital-expenditure cycle building pipelines to China Germany and Southern Europe via Turkey so they haven't been paying out 50% of profit.    They promise to pay  30% for 2019, 40% for 2020 and 50% for 2021.  based off current stock price and the current ruble exchange rate  the dividend yield I will see this summer will be 8.5% 

[Bob_W + 37]

On 4/11/2020 at 8:47 PM, oilnoobie said:

Thanks @Jay McKinsey.   Any recommendations for how an average investor can go long oil assuming a long term horizon? 

I hesitate to recommend anything in particular, not being an expert. 

But, generally speaking, there are company stocks that track oil price moves pretty well, while paying dividends too.  Assuming you don't pick one that goes out of business...

And there are actively managed crude oil ETFs that remove some of the issues with standard commodity ETFs.

[Bob_W + 37]

Also, read this article that lays out the reason, with simple enough math for even me to understand, why leveraged ETFs are unsuitable for buy-and-hold investors.

https://www.etf.com/sections/features-and-news/dont-buy-and-hold-leveraged-etfs?nopaging=1