Are 3x leveraged ETFs the long-term winning strategy?

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Hydromod
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by Hydromod »

watchnerd wrote: Wed Apr 14, 2021 9:45 am Well, the Roth route is now off the table.

It's at Vanguard and Vanguard apparently won't let you buy leveraged ETFs in any account.

So it will have to be another account elsewhere.
You might want to check out some reviews at Optimized Portfolio.

I've had some success at M1, a bit clunky getting funds in and some smaller LETFs are not available; that is most definitely not a day trading platform if you were into that.
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tradri
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

Hydromod wrote: Wed Apr 14, 2021 10:52 am
You are allowed to have a Roth IRA that you can (i) directly fund up to $6000/yr ($7000/yr over 50), if you earn less than a certain threshold, or (ii) indirectly fund up to the same amount by creating a traditional IRA and rolling it over (the backdoor Roth), if you make more than the threshold. The backdoor process has certain limitations if you have other traditional IRAs.

You can also have a 401(k) or 403(b) Roth, which is contributed to like a normal 401(k) except with after-tax income instead of before-tax income.
Interesting, thx.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by olympia_t »

EfficientInvestor wrote: Mon Apr 12, 2021 1:46 pm
tradri wrote: Mon Apr 12, 2021 1:01 pm Honestly, when looking at a quarterly rebalanced strategy for 70/30 UPRO/TMF vs 210/90/-200 SPY/TLT/CASHX, the difference in CAGR between those 2 strategies isn't all that far apart. (since the inception of these funds) https://www.portfoliovisualizer.com/bac ... tion5_2=30

The 210/90/-200 SPY/TLT/CASHX futures strategy does produce a ~2% higher CAGR over that time period, but aren't there a lot of other issues when using futures? In the original HFEA thread, he said that futures can only be bought for $140k a piece, which would make it very difficult to get started & later on size your positions. Also, isn't it possible to lose more than your initial investment with futures, since you have the right and obligation to fulfill the future at the end? Doesn't this also mean that one has to have substantial collateral in the account, and therefore the risk of getting margin called?

And for options, as you said, the CAGR will be lower than the -CASHX Portfolio Visualizer approximation, so they don't really provide an advantage over leveraged ETFs, right?
The monthly rebal and annual rebal both have a CAGR difference of around 5%, not just 2%. I would say the 2% difference is just the result of good rebal timing that you can't necessarily expect going forward.

The e-mini micro contracts currently go for around $20k, so that isn't too bad. The size of the treasury contracts are definitely limiting since they are $100k or more.

You can definitely lose more than your initial investment with futures and this needs to be accounted for in how you manage the portfolio. I keep a certain amount of cash on hand to handle the daily fluctuations. I keep any additional unused capital in an ultra-short term bond fund like JPST. I would never do a 210/90 portfolio with just futures. You either need to lower the leverage or use options to cover the worst case scenarios so you don't lose all your money. For someone that otherwise wants similar volatility to 100% stock, you would probably want something more like 90% stock and 60% LTT.

Regarding options...you can't really do a comparison using Portfolio Visualizer. The cost and benefit of the options can't be reflected in the backtest. I personally buy put options (or in the money call options) 2 years out in time to serve as my downside protection and then offset the price of those by selling monthly covered calls against 25-33% of my holdings. This keeps the portfolio around theta neutral so that the daily premium received from the covered calls will theoretically offset the daily premium paid out for the protection. The intent of doing all of this is to try to hedge black swan events by giving up a little of your potential upside. By applying the hedges, you are giving up some potential return, but you are also reducing standard deviation. Overall, the goal is to end up with higher risk-adjusted returns by mitigating the really large drawdown event.
Kinda late to this thread and still learning but would love if you had any links to resources on how you use options. Thanks for any suggestions, still trying to learn about more than just buy and hold.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by Anon9001 »

tradri wrote: Wed Mar 24, 2021 2:14 pm All of this data makes me personally really excited about holding a 3x leveraged ETF on a broad index like the S&P 500 for the long-run, but I would love to hear your insights on that topic.
200 MA Market-timing Leveraged ETF's seems to better idea. Here is comparison with 68% ULPIX 32% VUSTX (This AA is picked because it has similar volatility to the market-timing leveraged ETF). The Sharpe, Sortino and CAGR is higher with the market-timing approach.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by EfficientInvestor »

olympia_t wrote: Mon May 24, 2021 2:03 pm Kinda late to this thread and still learning but would love if you had any links to resources on how you use options. Thanks for any suggestions, still trying to learn about more than just buy and hold.
Not sure there are any resources out there that explain my specific use of options. I would recommend learning everything you can about options and how they can be used for hedging and leverage. Develop a good understanding of what a put and call are and develop a good understanding of all the options greeks (delta, theta, etc.). Once you have a thorough understanding of the concepts, you will be better equipped to understand how you want to implement the use of the options. Here are a couple good resources:

Option Alpha Courses: https://optionalpha.com/courses/options-basics
Investopedia Articles: https://www.investopedia.com/options-ba ... al-4583012
chris319
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Oh gawd, you don't want to do options.

With options you are fighting not only price action, which is unpredictable, but you are also fighting time decay (or it's fighting you).

Buy & hold may be boring, but if you're serious about making money, buy & hold is the way to go. That's why Jack Bogle's index funds were considered revolutionary decades ago. Now they're considered time-tested.

With buy and hold, you're not chasing a randomly-moving target so you're not fighting unpredictability the way you would be if actively trading.

There are also tax considerations when actively trading in a taxable account.

I love my 2x LETF's and they are good to me, despite all the crapola scare-story videos on YouTube. 3x LETF's work great in a bull market but are suboptimal in a bear market. Studies have shown that 2x seems to be the sweet spot.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by yellowJackets »

chris319 wrote: Mon May 24, 2021 3:14 pm Oh gawd, you don't want to do options.

With options you are fighting not only price action, which is unpredictable, but you are also fighting time decay (or it's fighting you).

Buy & hold may be boring, but if you're serious about making money, buy & hold is the way to go. That's why Jack Bogle's index funds were considered revolutionary decades ago. Now they're considered time-tested.

With buy and hold, you're not chasing a randomly-moving target so you're not fighting unpredictability the way you would be if actively trading.

There are also tax considerations when actively trading in a taxable account.

I love my 2x LETF's and they are good to me, despite all the crapola scare-story videos on YouTube. 3x LETF's work great in a bull market but are suboptimal in a bear market. Studies have shown that 2x seems to be the sweet spot.
Can you tell which study are you referring too?
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Can you tell which study are you referring to?
There may be a link to it in this 15-page thread. Or try googling for "leveraged index funds" or "leveraged etf". I'll leave the searching to you.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by ensign »

No. On second thought: HELL NO!
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

ensign wrote: Tue May 25, 2021 7:14 am No. On second thought: HELL NO!
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

yellowJackets wrote: Mon May 24, 2021 5:26 pm
Can you tell which study are you referring too?
Have a look at this:

https://holygrailtradingstrategies.com/ ... d-ETFs.pdf
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by watchnerd »

chris319 wrote: Tue May 25, 2021 8:28 am
yellowJackets wrote: Mon May 24, 2021 5:26 pm
Can you tell which study are you referring too?
Have a look at this:

https://holygrailtradingstrategies.com/ ... d-ETFs.pdf
That looks like a marketing white paper from a site that has waaay too many bold BLUE, GREEN and RED fonts and cheesy graphics on the home page trying to sell their secret technique subscription ($399 for 3 months!) for me to avoid skepticism as to their bona fides.

Any rando can write papers and post them on the internet.
Last edited by watchnerd on Tue May 25, 2021 8:39 am, edited 1 time in total.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 8:28 am
yellowJackets wrote: Mon May 24, 2021 5:26 pm
Can you tell which study are you referring too?
Have a look at this:

https://holygrailtradingstrategies.com/ ... d-ETFs.pdf
The link shows that a 2x leveraged ETF would have produced about 1% higher compounded returns than the S&P 500. (with much higher drawdowns obviously)

I believe there are much better ways to achieve a 1% higher CAGR (or more) with much less drawdown. (for example small cap value)
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Re: Are 3x leveraged ETFs the long-term winning strategy?

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I removed an off-topic interchange discussing cryptocurrency. As a reminder, see: Greater Fool Investing Strategies
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by junior »

tradri wrote: Tue May 25, 2021 8:38 am
chris319 wrote: Tue May 25, 2021 8:28 am
yellowJackets wrote: Mon May 24, 2021 5:26 pm
Can you tell which study are you referring too?
Have a look at this:

https://holygrailtradingstrategies.com/ ... d-ETFs.pdf
The link shows that a 2x leveraged ETF would have produced about 1% higher compounded returns than the S&P 500. (with much higher drawdowns obviously)

I believe there are much better ways to achieve a 1% higher CAGR (or more) with much less drawdown. (for example small cap value)
People who support leveraged ETFs do it on the premise they work better post 1990 or so with different monetary policy. A study from 1885 on is not surprisingly going to have different results.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by seajay »

I've longer term held LETF's to good effect. Half in a 2x stock index fund within limited size tax efficient (exempt) space, half in bonds outside of tax efficient, yearly rebalanced. Broadly the rewards are comparable

In other cases if you want to migrate funds from one account to another, two tax exempt accounts where you're not permitted to otherwise draw/move funds, then you can do that via long/short pairs, for instance click the Annual Return tabs for a feel for how capital movement occurs. Rather than balanced long/short you can tilt it to be more long (or short) as however you see fit.

In the UK you can add up to 100% of your wage into a SIPP (pension savings account) to which 20% is added, but that isn't accessible until mid/late life. ISA accounts in contrast can have around $30,000 year added, gains within that are tax exempt and you can draw out capital from that (but not return it once removed). 50K wage, add 40K into SIPP, 10K added, which via long/short could be migrated over to the ISA. I believe the US counterparts are ROTH and IRA.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

junior wrote: Tue May 25, 2021 11:31 am
People who support leveraged ETFs do it on the premise they work better post 1990 or so with different monetary policy. A study from 1885 on is not surprisingly going to have different results.
And I support the Crypto market on the premise that it works better since Elon Musk started talking about it... :oops:

If debt cycles are cyclical, there is no reason to believe that these debt cycles stopped working post 1980. https://www.youtube.com/watch?v=PHe0bXAIuk0
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

FYI, QLD split 2:1 today, May 25, 2021.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

The link shows that a 2x leveraged ETF would have produced about 1% higher compounded returns than the S&P 500. (with much higher drawdowns obviously)
Can you back that up with some figures?
Last edited by chris319 on Tue May 25, 2021 2:10 pm, edited 1 time in total.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 1:43 pm
The link shows that a 2x leveraged ETF would have produced about 1% higher compounded returns than the S&P 500. (with much higher drawdowns obviously)
Can you back that up with some figures.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by watchnerd »

tradri wrote: Tue May 25, 2021 1:50 pm
chris319 wrote: Tue May 25, 2021 1:43 pm
The link shows that a 2x leveraged ETF would have produced about 1% higher compounded returns than the S&P 500. (with much higher drawdowns obviously)
Can you back that up with some figures.
Image
I can't get all jazzed about 1% better CAGR for the downside risk.

Yes, I realize the power of compounding, but I can also just save more to increase the capital base to get the same dollar output on a lower CAGR for less risk.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

watchnerd wrote: Tue May 25, 2021 2:38 pm
tradri wrote: Tue May 25, 2021 1:50 pm
chris319 wrote: Tue May 25, 2021 1:43 pm
The link shows that a 2x leveraged ETF would have produced about 1% higher compounded returns than the S&P 500. (with much higher drawdowns obviously)
Can you back that up with some figures.
Image
I can't get all jazzed about 1% better CAGR for the downside risk.

Yes, I realize the power of compounding, but I can also just save more to increase the capital base to get the same dollar output on a lower CAGR for less risk.
On top of that, there are most likely smarter ways to get that extra 1% CAGR (or more).
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Period = 50 years

Initial investment = $10,000

At 4% CAGR: final value = $71,067

At 5% CAGR: final value = $114,674, more than 61% higher

For an unmargined investor, of what consequence are the drawdowns other than purely psychological?
Financial decisions based on emotion often turn out to be bad decisions.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 2:55 pm Period = 50 years

Initial investment = $10,000

At 4% CAGR: final value = $71,067

At 5% CAGR: final value = $114,674, more than 61% higher

For an unmargined investor, of what consequence are the drawdowns other than purely psychological?
You are implying that leverage is the only way to get higher returns.

I would recommend reading the excellent book Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by elderwise »

FWIW i started the OG HF strategy switched to 100% TQQQ, then after some time have now switched to 100% FNGU (ETN).

this is not 100% of my NW or PF..probably 30%
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by OohLaLa »

I hope you guys aren't going back to the topic of 2x and 3x funds in isolation. :( A fund like that needs friends.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

You are implying that leverage is the only way to get higher returns.
No I am not. Kindly don't put words in my mouth.

What's your formula for higher returns? Picking individual stocks doesn't count; it isn't bogleheaded.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 3:14 pm
You are implying that leverage is the only way to get higher returns.
No I am not. Kindly don't put words in my mouth.

What's your formula for higher returns? Picking individual stocks doesn't count; it isn't bogleheaded.
My "formula" for higher returns is basically following the research on stock market returns.

Over time academics have come out with various models that try to explain the differences in returns between diversified portfolios. (like the famous Three-Factor-Model by Fama & French: https://www.ivey.uwo.ca/media/3775518/t ... eturns.pdf) and nowadays, those models (like the Five-Factor-Model) explain close to 100% of the differences in returns between diversified portfolios.

So, in a sense, investing has been solved.

Therefore, I feel comfortable putting my money into small-cap value funds, as those provide the highest exposure to the known factors that have driven the risk and return of diversified portfolios over time.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by watchnerd »

chris319 wrote: Tue May 25, 2021 3:14 pm
You are implying that leverage is the only way to get higher returns.
No I am not. Kindly don't put words in my mouth.

What's your formula for higher returns? Picking individual stocks doesn't count; it isn't bogleheaded.
There are papers that discuss tactical asset allocations strategies for adjusting stock/bond split according to valuations that have yielded about 1% CAGR improvements.

Not relevant, though, if you're 100% equities.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

I feel comfortable putting my money into small-cap value funds, as those provide the highest exposure to the known factors that have driven the risk and return of diversified portfolios over time.
Namely?

What is the answer to my question: for an unmargined investor, of what consequence are the drawdowns other than purely psychological?
Financial decisions based on emotion often turn out to be bad decisions.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 3:49 pm
I feel comfortable putting my money into small-cap value funds, as those provide the highest exposure to the known factors that have driven the risk and return of diversified portfolios over time.
Namely?
Market beta, size, value (the original 3 factors) and profitability and investment (the additional factors forming the Five Factor Model)
chris319 wrote: Tue May 25, 2021 3:49 pm
I feel comfortable putting my money into small-cap value funds, as those provide the highest exposure to the known factors that have driven the risk and return of diversified portfolios over time.
What is the answer to my question: for an unmargined investor, of what consequence are the drawdowns other than purely psychological?
The consequence is, that it may take longer (if at all) to recover from them, than if you followed a different strategy.

For example, here is a comparison between 2x S&P 500 vs Vanguard's small cap value fund:

Image

Red is 2x S&P 500, Blue is VSIAX.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Namely?

Market beta, size, value (the original 3 factors) and profitability and investment (the additional factors forming the Five Factor Model)
Is VSIAX the answer to my very simple question to you?
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 4:52 pm
Namely?

Market beta, size, value (the original 3 factors) and profitability and investment (the additional factors forming the Five Factor Model)
Is VSIAX the answer to my very simple question to you?
It depends on how much concentration you are comfortable with.

VSIAX is a bigger, more growth-oriented fund than other small cap value funds (like AVUV for example).

More concentrated funds will deviate more strongly from the market, but they also have the potential for more outperformance.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Code: Select all

Portfolio 1	VSIAX	$10,000		$38,155 	15.00% 

Code: Select all

Portfolio 2	VOO	$10,000		$44,777 	16.93% 
Financial decisions based on emotion often turn out to be bad decisions.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 5:06 pm

Code: Select all

Portfolio 1	VSIAX	$10,000		$38,155 	15.00% 

Code: Select all

Portfolio 2	VOO	$10,000		$44,777 	16.93% 
Time period? :D
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

tradri wrote: Tue May 25, 2021 5:08 pm Time period? :D
Oct 2011 - Apr 2021
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by Semantics »

Seems like a bunch of posters got enamoured by the nice looking chart and ignored the fine print: "The construction of this index is described in Schwert (1990) and the index used is the capital index (no dividends reinvested).".

Also it should be obvious that dividends weren't considered. Total returns of 1x the market are well over 4%.

Image
Last edited by Semantics on Tue May 25, 2021 5:17 pm, edited 1 time in total.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 5:11 pm
tradri wrote: Tue May 25, 2021 5:08 pm Time period? :D
Oct 2011 - Apr 2021
Yeah, that time period wasn't very kind to value.

From 2016 to March 2020 value had its most drastic underperformance (relative to growth) in all of US stock market history.

On top of that, from 2018 to 2020 the only thing that "worked" was FAANG. https://papers.ssrn.com/sol3/papers.cfm ... id=3774164

But I see this as a very bullish sign for value going forward, since nowadays the value-growth spread is as high (if not higher) than during the dot-com bubble.
Last edited by tradri on Tue May 25, 2021 5:21 pm, edited 1 time in total.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

Semantics wrote: Tue May 25, 2021 5:15 pm Seems like a bunch of posters got enamoured by the nice looking chart and ignored the fine print: "The construction of this index is described in Schwert (1990) and the index used is the capital index (no dividends reinvested).".

Image
This paper/article is pretty useless anyways, since they don't account for borrowing costs.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Seems like a bunch of posters got enamoured by the nice looking chart and ignored the fine print: "The construction of this index is described in Schwert (1990) and the index used is the capital index (no dividends reinvested).".
This poster has tested this independently on NDX. The sweet spot in my test was closer to 2.5.

Given a choice between a 2x fund and a 3x fund, the 3x will perform better in a bull market but a 2x fund performs better in a bear market. And yes, I accounted for borrowing costs.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Yeah, that time period wasn't very kind to value.
I figured you'd have an excuse.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 5:26 pm
Yeah, that time period wasn't very kind to value.
I figured you'd have an excuse.
It wouldn't be a risk premium if it doesn't have the risk of underperformance. :wink:

The stock market underperformed bonds for decades in the past. (hence the market risk premium)
chris319
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by chris319 »

Oct 2011 - Apr 2021

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Financial decisions based on emotion often turn out to be bad decisions.
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tradri
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

chris319 wrote: Tue May 25, 2021 5:43 pm Oct 2011 - Apr 2021

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VSIAX	Portfolio 1	$10,000		$38,155 	15.00% 

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VOO	Portfolio 2	$10,000		$44,777 	16.93% 

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OohLaLa
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by OohLaLa »

Did not find any Small Cap Value leveraged funds (pretty specific slice), so how can we even compare it to other 2x funds? Unless someone wants to go on margin or options, then it seems to be a moot point.

Also, bringing back my point... Why 100% into the equities side (whether Nasdaq100, SP500 or Small Cap Value)? Even with 0 leverage, 50-50 SCV + LTT ends up being a much, much better choice than 100% SCV:
https://www.portfoliovisualizer.com/bac ... tion2_2=50

I think I will have to have "He died as he lived: always hedging." engraved into my tombstone. :mrgreen:

EDIT: forgot to add, if you could get an equity-swap based fund leveraging SCV 2x, you'd be in business, I imagine. Won handily against the classics (SP500 and N100).
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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by tradri »

OohLaLa wrote: Tue May 25, 2021 5:53 pm Did not find any Small Cap Value leveraged funds (pretty specific slice), so how can we even compare it to other 2x funds? Unless someone wants to go on margin or options, then it seems to be a moot point.
By using backtests? (like the one I posted above taken from the Simba LETF backtesting spreadsheet)
Also, bringing back my point... Why 100% into the equities side (whether Nasdaq100, SP500 or Small Cap Value)? Even with 0 leverage, 50-50 SCV + LTT ends up being a much, much better choice than 100% SCV:
https://www.portfoliovisualizer.com/bac ... tion2_2=50
This is a result of the long bond bull market during that time period. Unlikely to repeat.

I think I will have to have "He died as he lived: always hedging." engraved into my tombstone. :mrgreen:

EDIT: forgot to add, if you could get an equity-swap based fund leveraging SCV 2x, you'd be in business, I imagine. Won handily against the classics (SP500 and N100).
I doubt a small cap value LETF will be useful. The higher volatility will most likely do more harm than good.
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Re: Are 3x leveraged ETFs the long-term winning strategy?

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Re: Are 3x leveraged ETFs the long-term winning strategy?

Post by Ramjet »

chris319 wrote: Tue May 25, 2021 2:55 pm For an unmargined investor, of what consequence are the drawdowns other than purely psychological?
Sorry if I missed it but are you pairing your leveraged ETF with a bond ETF or similar, e.g., LTT, ITT, or cash?

If so, besides the chance of underperformance because of market conditions, yeah, much of the risk is psychological

If not, and you are holding the LETF in isolation, well during a drop of 50% or more your LETF could drop much more than that and take a much longer time to recover than an unleveraged investor. Basically, underperforming the normal fund by a great deal
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