Self Directed Brokerage Account

[valueinvesting101]

I want to open Self Directed Brokerage Account under my 401K plan. My employer has tie up with JP Morgan Securities. Does any have any experience with them?

 

Currently plan allows investments only in Mutual funds and ETF. I want to invest using SDBA as I want to invest in financial sector ETF. This is currently not offered as part of funds offered under 401K plan. I understand this can be risky move but I feel good enough conviction about better performance from financials.

 

Any good recommendation for ETF tracking financial sector? Are leveraged ETF too poor at tracking index performance or just too costly? I can get this information online as well but I would get perspective from board members.

[beerbaron]

Levered ETF should be avoided at all cost, the fees are high and the tracking error makes it even worse. Maybe the warrants would be a better bet.

 

BeerBaron

[ItsAValueTrap]

Are leveraged ETF too poor at tracking index performance or just too costly?

 

In my opinion, leveraged ETFs are highly flawed because;

 

1- They have to rebalance their exposure to maintain a constant 2X / 3X exposure every day.  They constantly sell the dips and buy the rallies... most (but not all) of the time, they are constantly buying high and selling low.

2- They generate excessive transaction costs.  To get the additional leverage, they often use obscure and illiquid derivatives and swaps.  The drain could be 5-20%/year.  http://glennchan.wordpress.com/2012/11/07/leveraged-etfs-a-market-inefficiency/

3- Of course there is the management fee, which is often a little high when compared to Vanguard.