Making Money With TSLA Vs. The S&P 500
Jani Ziedins | Feb 19, 2020 05:24PM ET
Alternate title: 'Why I swing trade the indexes'
It is hard to ignore what is going on in Tesla (NASDAQ:TSLA) with the stock up 43% this month alone. While it definitely feels like this shocking move left alot of us behind, should we actually feel bad about missing it?
There are many reasons why I settled on swing-trading the indexes using leveraged ETFs. One of these days I will write more about the fundamental reasons I like this trade. But for today, let’s focus strictly on performance. How does swing-trading the indexes using leveraged ETFs compare to holding a basket of the hottest stocks, including the record setting TSLA?
First, I am only comparing owning the underlying stocks since that is what sane people do. While there are plenty of internet stories of people turning $1,000 of far out of the money calls into a million bucks on TSLA, that is nothing more than gambling with lottery tickets. People who approach the market with such a total disregard for risk management go broke within a year. (There are responsible ways to structure Black Swan trades, but I doubt any of the people making headlines were doing it responsibly.)
Also in the name of risk management, let’s assume any sane person holds a basket of highflying stocks since putting all of their money into a single stock is also reckless. But not to give anything away, this hypothetical person is extremely aggressive and his entire portfolio is concentrated in this market’s hottest trades.
For the sake of argument, let’s say he holds five popular growth stocks: TSLA, Netflix (NASDAQ:NFLX), Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), and let’s throw an IPO in there for fun, PTON.
How does this basket of stocks compare to ProShares UltraPro S&P 500 (NYSE:UPRO), the 3x leveraged S&P 500 ETF, since the start of the month?
PTON: -17% Can’t win them all.
Average: 12% For only a few weeks of work, that is a fantastic return.
Now for the boring index fund:
UPRO: +16%
Yup, you read that correctly. A borning index ETF outperformed a basket of the hottest stocks, including the nearly unpreceded surge in TSLA. Do I feel bad about missing TSLA? Nope, not in the least.
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