People who call leveraged ETFs like SPXL a 'wealth destroyer' are just too impatient.
Here, I simulated SPXL all the way back to 1935, because the real SPXL only started in 2008. From the log chart, the ETF seems reliable over the long term, while vastly outgrowing SPY. It 10x'es every ~18 years (ignoring dividends), so put 10k in now, and be a millionaire in 36 years. With reinvesting dividends, it's 10x every ~16 years.
Why not do this?
Why hold SPY, when you can hold SPXL? (That’s SPY but 3x leveraged)
byu/Ok_Eagle8991 inwallstreetbets
Posted by Ok_Eagle8991
41 Comments
Been awhile since we got a nice big single day drop in the SP500.
leveraged SPY is the way to go if you can diamond hand through 50% losses, which happen every decade or so.
you might be better off going half into SPXL and half into TLT and start buying once the recession starts. Once recession is declared, sell 5% TLT every month and buy SPXL with the proceeds until you have no more TLT left.
Why stop at SPXL? Why not hold TQQQ? Not like it dropped 75% in 2022. Just hold long term silly.
One word: dailies
SPYU has entered the chat…
Bad simulation
Buying LETFs in bubble top frothy markets like this one is a surefire way to destroy what little wealth you have.
You only go long on LETFs in situations like October 2022 when markets are crushed and the bottom is forming.
But what the fuck do I know.
Why nuke a city when you can hydrogen bomb Seattle
Usually i prefer TQQQ so i hold that instead.
I actually have been looking into this and might dca into spxl going forward. Someone mentioned volatility decay by its design but it seemed to drastically outperform spy during bull markets and massively slaughtered during bear markets. Been looking into this and maybe holding something less volatile like TLT or gold to balance it. Even thought maybe a leap put otm 50% down for every 100 shares might offer good enough protection. I have decision anxiety I can’t decide what to do! You could even do a harry brown permanent portfolio and change vti for spxl with basically the same market returns of just sitting in SPY ☠️
!Remindme 36 years: “Get-a-load of this guy! ~American Psycho”
How exactly did you simulate SPXL prior to 1935? Did you just 3X the daily gain/loss of the S&P?
Don’t do what I did and go leveraged russell the butt muscle.
if your backtesting is right then yea, you’re dead right. trouble is, like everything, can you psychologically handle the draw downs and feeling maybe it never recovers. i held spxl and tqqq but both as long seeing positions. i tried holding them for life in a seperate account but sold last year when they doubled from my entry. logic just didn’t have the power that worry does.
Why? Most brokers let you borrow 1:1 or 2:1 spy/qqq but will only let you borrow 0.5:1 for leveraged etf. Outside of the extreme bull market years (like this one), spy/qqq will out perform because you can have 100k of spy and 200k of borrowed spy vs 100k of 3x spy etc and 50k of 3x spy etf.
And while most years margin leverage outperforms built in leverage, leveraged spy through margin is also safer. The potential returns the few years built in leverage wins on a 0.5:1 3x etf just isnt worth the long term risk for the return when compared to the returns and risks on 1:1 spy
Tldr. Leveragd through 1:1 margin spy etf is better returns and less risk than non margined 3x spy etf
However, its not a regarded idea. If you want to buy 3x spy etf, youre still going to “win.” Its just worse
Why stop at 3x. There is a 4x spy now. SPYU.
I’ll be 94.
I did this and got burnt in the recent past, but it recovered a bit in the more recent past.
why hold SPXL when you can hold SPYU (that’s SPY but 4x leveraged)
With leverage, does it mean you can get wiped out before it goes to zero? If you can have more potential gain with same amount of capital, what is the catch?
>Why not do this?
I am. I’ve held UPRO (a 3x SPY etf like spxl) for four years straight now. It’s currently up 323%.
Thanks OP gonna buy puts. We are at the top.
If there is a crash big enough, that might wipe out the levered ETF 100%. Think UVXY.
Why go outside and fly a kite when you can just pop a pill?!
The convexity. You’re buying more every day the market goes up and selling every day the market goes down. So you lose in a volatile market with no direction.
I just use portfolio margin and 3x leverage, but choose when to buy more.
I’ll go all in after next crash
Why not just buy calls on spxl?
I’m waiting for trump to get in so I can go all in on SQQQ
Banks print money out of thin air. SP500 goes up.
1.02% vs 0.09% expense ratio
Dumbass doesnt know what volatility decay is
My most successful period of time in the market was 50% tqqq, 20% tmf, 10% virt, 20% berk.b
Because $SPYU is 4x leveraged
3x is pussy shit
Go over to tqqq
They argue the same shit relative to Nasdaq
Personally I agree with you and subscribe to your theory
They’ll tell you it’s the drawdowns. They’ll tell you it’s “rebalancing”…
I know where the math maths
Just buy options at this point
I hold TMF, about $13k, 248 shares. 52.51 avrg cost basis
SPXL went from like $110 to $67 in October 2023. I mean yeah if you caught that bottom you did well. But if you buy now and the market tanks 10 percent you’re screwed.
I bought DFEN (3x bull military etf) during the covid sale. Sold it recently because of Boeing, but it was up like 275% over that time
RETL post-covid did even better. Was +1800% at one point.
Because the downturn is 3x + as bad as
What would be the equivalent of this for a brother north of the border ?
EDIT: seems like we have HSU at 2x leverage.
Oh my sweet ~~summer~~ leveraged child, I see you don’t understand the tax implications. Leveraged ETFs are rebalanced **daily** to drop out the losers and add winners. However, this causes you to pay way too much tax then you would have by holding a regular etf on a long term basis. That’s because long term capital gains ( stocks / ETFs held longer than a year ) are taxed significantly less than leveraged ETFs. More specifically, if you’re in the 37% range, you pay 20% on long term capital gains, and pay 15% if you’re in the 25% range and pay **0%** if you’re in the 10% range. This significantly reduces the tax you pay on your gains specially over the long term. As far as I know, this harms your portfolio more than it benefits. Also, I just checked and saw you get a 1.20% 30 day yield on SPY and 0% on SPXL as of right now. So with dividend reinvestment, it’ll make a lot of difference over the long term.