In the past few days, YANG, the ETF that tripled shorted China, plunged 25% in one day. I can't help but feel emotional when I see this news.

Once I invested a total of over $30,000 on YANG before and after, in March this year, when I was calculating my returns, I realized that the Hong Kong stock market was dropping from January to March 2024, but I actually didn't make any money. If I hadn't woken up and pulled out in March, I would have lost a lot of money otherwise. Looking back at the price action, I was actually in the highs area when I pulled out, but even so, I still lost more than $1,000 USD, which translates to more than 10,000 RMB. This experience taught me a profound lesson. Even if you think your judgment of the general trend is correct, you can't ignore the human manipulation factor and the huge depletion caused by highly leveraged ETFs like YANG.

Next, I'll briefly review a few key points mentioned in the previous video.

Along with the end of China's rapid economic growth, the problems accumulated over the years are gradually revealed. Expectations of an economic downturn are increasingly becoming the consensus of many investors.
Rich people are choosing to run away with their capital, and some are trying to realize asset appreciation during the economic downturn by triple shorting China's ETFs on the U.S. stock market.
I also hold the same view of expectations, especially the implementation of the accompanying policies in Hong Kong, Hong Kong is no longer the previous Hong Kong, capital outflow market shrinkage.

I invested in YANG for about 5 months, and after doing the math, I realized that I had taken myself for granted when I started to dive in headfirst. I thought it would go up if China's stock market went down, but after doing the math, I realized that the stock's losses are extremely high, and if I don't grasp the timing well, I will be reduced to the fate of "working for the fund".

YANG in US stocks tracks not the mainland China index but the Hong Kong China index. The positive counterpart is the fund FXI in US stocks. In terms of long-term trend FXI is basically in line with the overall trend of the Hang Seng Index, and there is not much difference between the two.

Let's take a look at how much of a drain YANG really is, and it should be noted that for simplicity of calculation neither FXI nor YANG's dividend yield is calculated:

Investing in YANG must be timed to sell at a short-term profit, otherwise the principal will be lost in the friction of the friction. Back to the historical trend comparison, only when the trend judgment is correct, and is a short period of large fluctuations, the purchase of YANG is profitable, otherwise basically can not get rid of the loss situation.

For example, over a four-week period from February to March 2022, as the China 50 Index declined rapidly, YANG's returns reached a big increase in

But if you don't look at the right time to get in and out quickly, you'll be back in the dust in one more week.

Here's a look at why it's depleting, with an example of a triple leveraged TQQQ:

Suppose the Nasdaq 100 is 10,000, up 10% on day 1 and down 10% on day 2 to 9,900, for a cumulative loss of 100 points, or 1%, in the index.

If you buy the unleveraged QQQ ETF for $1,000, you hold a net value of 990 after 2 days; in other words, the unleveraged ETF has no loss, the price is in line with the index, and you have accumulated a loss of $10, which is also 1%.

If you bought TQQQ with 1000 principal, if the NASDAQ 100 index goes up 10% on day 1 as we said above, TQQQ will go up 30%, why? Because it is a NASDAQ 100 do long 3 times fund, the fund manager will lend you 2000, so the total amount becomes 3000, which is equivalent to 3 times leverage, and since the index rises 10%, it becomes 3300, then you pay back the 2000 dollars you borrowed from the fund manager, and your account becomes $1300, a net gain of 300, that is, the gain made from the 2000 that the fund manager lent you, which is also belongs to you, so you end up making 30%.

But leverage is a double-edged sword, in order to maintain the 3x leverage ratio, the fund manager continues to lend you $2,600, but unfortunately, on the 2nd day the index falls 10% and your total account becomes 3,510, paying off the fund manager's 2,600, leaving you with $910, which is a cumulative loss of $90, or a loss of 9%, compared to your 1,000 principal.

The index was up 10% on day 1, down 10% on day 2, and ultimately only down 1%, while the 3x leveraged ETF was down 9%.

Obviously, even if the index returns to its original position, this leveraged ETF will not be able to rise back to its original price. This kind of permanent loss due to oscillations is called oscillator loss, and the more volatile the tracked index is, the more pronounced the oscillator loss is.

I haven't been in US stocks for a long time, and I have a conservative investment style, hoping to build up a stable pension before I retire. This attempt has made me realize the principle of "plan before you move" more deeply. Welcome to my channel, if you are a new investor, we can communicate and snowball together; if you are a veteran investor, please give me more advice!