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A 2x levered S&P 500 ETF will always be buying when the market is high and selling when it's low (the debt will end up less than 50% of the value if the market
by throwaway34241 7y ago
A 2x levered S&P 500 ETF will always be buying when the market is high and selling when it's low (the debt will end up less than 50% of the value if the market goes up, requiring them to buy more to maintain 2x leverage, and the reverse when it's down).
So if the market doesn't move in a straight line you make less than 2x the S&P 500 return over time, including losing extra money in neutral and bear markets.
- smabie 7y agoSure, check out my post: ETFs, Volatility and Leverage: Towards a New Leveraged ETF Part 1 https://smabie.github.io/posts/2019/10/04/vol.html https://smabie.github.io/posts/2019/10/04/vol.html The word you’re looking for is volatility drag. Even so, levered ETFs are a good investment for most investors