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User 14605032

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  • Leveraged ETFs For The Long Term: Rockets To The Poorhouse? [View article]
    Very interesting article and love the simulations, but I think your methodology could be improved by looking at the ratio of GAINS in leveraged vs. unleveraged ETF's.

    You write:

    "If the index went from 100 to 150, and the leveraged fund went from 100 to 300, then the number shown will be 300/150 = 2."

    However, a perfectly functioning 2x etf would go to 200, not 300. This would give us a ratio of 1.333 (200/150).

    If an index rose from 100 to 110, and a 2x etf went from 100 to 120, the ratio would be 1.09 (120/110).

    If you subtracted the starting values in each case (100), the target ratio would be consistent at 2. Par would be 1. And anything under 1 would be underperformance.

    This would provide us a better understanding of how the leveraged ETF's perform over time.

    Would be very interesting to see the simulations re-run looking at gains only.

    Thanks!
    Dec 11, 2013. 06:23 PM | Likes Like |Link to Comment
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