To screen ETFs by asset class, performance, yield and more, check out the
View as an RSS Feed
Leveraged ETFs For The Long Term: Rockets To The Poorhouse?
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.
"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.
Dec 11, 2013. 06:23 PM
Link to Comment
Xignite quote data
© 2015 Seeking Alpha