Leverages ETF vs margin trade non-leverage

[DenmarkTrader]

I use interactive brokers. Therefore I get low margin rates around 2% p.a.

Therefore, is it most effect to
buy for USD200.000 IWM (1x Russell2000) with USD100.000 margin loan
or
buy for USD100.000 UWM (2X leveraged Russell2000)

Obviously, the "time decay" issue with leveraged ETFs would have an adverse effect on on the leveraged UWM, so that it is more cost effective to simply leverage the IWM

Any thoughts ?

 

[Amalgam]

It's not "time decay" it's vol decay. And the answer of which one you should choose depends entirely on your forecast of future vol.

 

[Apbideas]

It's not "time decay" it's vol decay. And the answer of which one you should choose depends entirely on your forecast of future vol.

Amalgam is 100% correct...what you experience owning a leveraged ETF is more similar to vol decay rather than time decay. Generally, if volatility falls your investment will outperform...if it rises your investment will underperform. Also, another important aspect to a leveraged ETF is that you can't lose more than you initially invest which is different from using margin.