The Intelligent Investor Considers Opportunity Cost

The Intelligent Investor Considers Opportunity Cost

In “The Intelligent Investor: The Sorcery That’s Conjuring a 7% Yield” (Exchange, Dec. 18), Jason Zweig does a rigorous job pointing out pros and cons, but he is too polite. The Strategy Shares Nasdaq 7HANDL Index exchange-traded fund (HNDL) works only if the market goes up. It poses higher risk in any market rout because it uses leverage and is 70% bonds.

If interest rates rise and stock prices plunge, HNDL might become an ETF whirlpool, with selling and return of capital pushing down its price, which begets more selling.

Investing is about opportunity cost. Better options offer the same or lower downside risk. Two examples are the Vanguard Balanced Fund (14.8% annual return in the past three years), and the BlackRock Global Allocation Fund (12.5%). Both funds fell the same 20% that HNDL fell in early 2020, yet their annual returns were 78% and 111% higher than HNDL’s. And their expense ratios are cheaper.

Jason Prattes

Newport Beach, Calif.

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