Using TWM as an example. Long term it looks very crazy. Like back in 2007 it was at $600 and now it is at $40. Let's say I have $10,000 in investing. My plan was to put $1,000 in something like TWM to offset my other investments. That way if we hit more bumps I'll be able to have something that is cutting back on the pain. My plan is if we hit another drop I'll sell TWM. I'm looking at TWM as a trade, not an investment. My other stocks are investments. This is a +/- 10% trade. I wouldn't expect to have TWM for more than 2 or 3 weeks and plan to auto-sell it if it drops 10%. Pretty standard stuff.
Everyone talks about how ETFs can kill you. Is there something other than the price that will kill me? I've got $1,000 in TWM. If TWM drops 10% I'll have $900... right? I won't have lost everything because of some daily compound interest fee calculation or whatnot? The ETF goes down, my investment goes down, the ETF goes up my investment goes up... correct? I'm very worried that at the end of the day some sort of fee is going to be leveraged against my account or something crazy is going to happen that'll zero out my account and force me to leap off the nearest bridge.
Edit: After doing some research it appears that long term ETF strategies tend to end poorly, almost like a radioactive half-life. This is especially true when dealing with 2x, 3x systems. There appears to be no other special gotchas for ETFs or Leveraged ETFs aside from a long term decay (and no promise of going up 30% just because it is a 3x). This exactly what I was expecting when I got into a Short ETF: I wanted something to deal with the volatility that has been plaguing the market without directly shorting stocks. My highest risk remains my $1,000 investment, no more. Loosing the entire $1,000 on TWM seems unlikely if I'm going to only hold it for the month of December. Please correct me if I am wrong.