This is a great example of the sensitivity to starting point. December 30, 1927 is near the top of a big bubble, having just doubled in price over 5 years (and a bit more to climb). You get a horrendous drop soon afterward, which would drop the 3x fund 2.5 orders of magnitude relative to the starting point by 1932 and 3 orders of magnitude by 1942.chris319 wrote: ↑Thu Apr 08, 2021 6:34 pm It was a chore but I managed to get ^GSPC daily data into a spreadsheet going back to December 30, 1927.
I implemented a LETF simulator in the spreadsheet. The leverage sweet spot is 2x. The worst one-day loss was on October 19,1987, losing 40.9%.
3x leverage is great in bullish times but 2x (SSO) is the better all-weather leverage through bull and bear markets.
At 2x leverage, CAGR is "only" 8.3%. $10,000 became $17,003,711.
Past performance is no guarantee of future results.
It makes a huge difference if one starts before, during, or after a big bubble.
Starting in at the rebound peak in 1937, right before the 3x index would have dropped 30-fold to 1942, and the 3x would still have returned 11.7% to date (2x => 10.7, 2.5x => 11.6%). Rather different return.
I agree, 2x leverage would probably have been more bearable. It appears that the 3x would have been slightly better, but I expect that expenses would have taken care of that.
If I calculate correctly, 1x would have returned 5.96% from 12/30/1927 and 6.65% from 1/1/1937.
I'm not advocating buy-and-hold UPRO or SSO in isolation by any means, I wouldn't dream of it myself, but my point is that it may make sense to draw conclusions based on a starting point roughly similar to current conditions rather than extremes. If you think we are near the top of a bubble, then perhaps a starting point on a bubble makes sense. If not, perhaps start away from a bubble. I'm pretty sure we aren't at the trough right now though!