Karl Zachar

The Case Against Leveraged ETFs

I was naively just about to buy a 2X leveraged ETF and your article shed a lot of light on the subject. Great article Tristan and great discussion. Thank you.

Here's my "problem". I am looking to invest in my IRA with a 10-20 year time horizon. (This is obviously a non-taxable account and I can't use leverage (no margin borrowing in an IRA)). My theory is that the SP500 will return an average of approx 8% per year for the next 10 years. So I am looking for an instrument that that is better than buying an ETF on the SP500. I want to get some leverage on the SP500. (The risk of doing this is that the first couple of years are key. If the market is down big in year 1 and 2, my leveraged SP500 idea will look pretty stupid.)

Assuming the market in teh next couple of years will not be disasterous, what instruments can I use? How about LEAPS on the SP500? Any better ideas?