Why don't I just load everything up SPXL?

[jim.thornton]

You are not taking into consideration that leverage works in both directions. With SPXL, you are assuming that it will only go UP. You also have SPXS which will give you the inverse return of 3%. So if the market goes up by 3% in one day, you would see +9% in the SPXL but if you had the SPXS then you would see -9%.

Let's say you lost 9% in one day, now you need to make that back. How much do you have to make in order to get your 9% back??? The answer is 9.89% just to get back to where you were.

Let's assume you invest $100,000. Have the markets ever gone down 3 days in a row?? Of course they have. Let's say 2% each day for 3 days the market declines. You would lose how much? Your assumption would be 2% x 3 (triple leverage) x 3 (for 3 days) = 18%, correct? Wrong! Because of daily compounding it is 16.94%.

Now, how much do you need to make in order to get that back? If you are thinking that you need to make 16.94% to get it back that is also incorrect. You actually need 20.39% just to get back to $100,000.

So to answer your question, the reason you don't want to just throw all your money into a 3xETF is because it will not behave the way you think it will. Just take a look at the returns of the ETF over it's history and it has not returned 3x the S&P return.

That said, it does return 3x the DAILY performance of the S&P. So, you need to exit the position the same day you enter it.

 

[murray t turtle]

If you can't beat the S&P 500, why not just load everything up on it's triple leveraged etf? I'm still new to trading and I'm still trying to find a good strategy, but I think SPXL is a pretty safe bet. Eventually I want to day trade the SPXL, but until I gain more experience would it be a good idea to just invest in the SPXL?

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Plenty of reasons NOT to do that; you want the TRUTH or a polite reply??
a] SPY drops[downtrends actually, see all data] 50%.
z]SPY drops[downtrends ]more than 50% ;
why leverage ignorance??
PS ;wisdom is profitable to direct ;overdue for a bear market, thanks for the question, old chap.

 

[Apbideas]

I think this new investor has a good point. Think loooooong term for a second rather than the usual three month time period we are all used to. If the market does tend to rise over time (decades) why not be levered into that. Above is a simulation of what would have happened if they had a triple leveraged daily rebalancing SPX fund back in the fifties and you bought and held it to this very day. Your $20 back in the fifties would now be worth $200,000 today rather than only being worth only $1,930 or whatever the SPX closed at on Friday. Sure, in some odd years due to extreme volatility you are down while the SPX is actually up but over the looooong term it looks like you'd come out way way ahead.

Now I wouldn't invest the lion's share of my portfolio in a leveraged fund but it looks like it may actually be a smart move to invest some small portion in leverage if only for the sake of diversification. Who knows, if we actually have another boom someday that small portion of your portfolio could become worth more than every other position that you have combined and then some. Maybe one day they'll make a movie about it and call it The BIG Long.

 

[Sig]

View attachment 161375

I think this new investor has a good point. Think loooooong term for a second rather than the usual three month time period we are all used to. If the market does tend to rise over time (decades) why not be levered into that. Above is a simulation of what would have happened if they had a triple leveraged daily rebalancing SPX fund back in the fifties and you bought and held it to this very day. Your $20 back in the fifties would now be worth $200,000 today rather than only being worth only $1,930 or whatever the SPX closed at on Friday. Sure, in some odd years due to extreme volatility you are down while the SPX is actually up but over the looooong term it looks like you'd come out way way ahead.

Now I wouldn't invest the lion's share of my portfolio in a leveraged fund but it looks like it may actually be a smart move to invest some small portion in leverage if only for the sake of diversification. Who knows, if we actually have another boom someday that small portion of your portfolio could become worth more than every other position that you have combined and then some. Maybe one day they'll make a movie about it and call it The BIG Long.

Again, a daily rebalancing 3X fund doesn't provide the long-term results you show. At all.

 

[Cswim63]

View attachment 161375

I think this new investor has a good point. Think loooooong term for a second rather than the usual three month time period we are all used to. If the market does tend to rise over time (decades) why not be levered into that. Above is a simulation of what would have happened if they had a triple leveraged daily rebalancing SPX fund back in the fifties and you bought and held it to this very day. Your $20 back in the fifties would now be worth $200,000 today rather than only being worth only $1,930 or whatever the SPX closed at on Friday. Sure, in some odd years due to extreme volatility you are down while the SPX is actually up but over the looooong term it looks like you'd come out way way ahead.

Now I wouldn't invest the lion's share of my portfolio in a leveraged fund but it looks like it may actually be a smart move to invest some small portion in leverage if only for the sake of diversification. Who knows, if we actually have another boom someday that small portion of your portfolio could become worth more than every other position that you have combined and then some. Maybe one day they'll make a movie about it and call it The BIG Long.

After the bull market has ended, of course

 

[Cswim63]

If you can't beat the S&P 500, why not just load everything up on it's triple leveraged etf? I'm still new to trading and I'm still trying to find a good strategy, but I think SPXL is a pretty safe bet. Eventually I want to day trade the SPXL, but until I gain more experience would it be a good idea to just invest in the SPXL?

Trading on retrospect isn't trading. You're just reinforcing a really bad habit. That of chasing a moving target with no plan whatsoever. It's wrong, wrong, wrong. Even if it works temporarily. What is the reason for getting into a trade like this in the first place? There isn't one. And price or history of price is not ever a reason.

 

[Jakobsberg]

If you can't beat the S&P 500, why not just load everything up on it's triple leveraged etf? I'm still new to trading and I'm still trying to find a good strategy, but I think SPXL is a pretty safe bet. Eventually I want to day trade the SPXL, but until I gain more experience would it be a good idea to just invest in the SPXL?

Based on the historical data, and all the problems that come with it (excluding russia, China which went to zero etc) then yes western stockmarkets have risen over time so provided you can survive the volatility and hold your positions then leveraged long on the SP500 or something similar is a good strategy and I'd do something similar if running a fund with very long term horizon........ HOWEVER you have to know when to pull the trigger on this strategy and i dont think now is it. 2008 and 2009 were ideal. Perhaps wait until the next recession or unemployment peak.