You could also use margin to buy that triple leveraged ETF... that way you could be leveraged x100 or something... that would be amazing! Lets all do that... I mean, interest rates are still below the long term average so basically the margin loan is very cheap.... What if we use margin to buy 20% ITM LEAP calls on that 3x ETF.... f#%k me... that could be a x1000 leverage.... you would rake it in... that has to be the easiest money made ever on a very safe and sound investment!!!
Not if you're DCA'ing regularly. You would likely do extremely well if you DCA'ed a 2x or 3x ETF equity ETF for the next 25 years.
This is fantastic as long as your accumulation period and your retirement yrs(at least the early ones) corespond with the long term bull. Many near retirement were so spooked by the 08/09 draw down they sold, down 40 percent, never to get back in. Missed the full next run, now have 20 + yrs to live on that nest egg -40 %.
It was not that many years since the equity in China and Russia got wiped out. Pretty misleading to pick one of the many index in the world to demonstrate your point and talk as if it was a sure thing. Of cause, the whole point of investing is to take risk, otherwise you would be earning the risk free rate.
No you would not. Your existing position would continue to decay even if you were right directionally. The "geared" ETF's replicate single day moves, they get eaten up by choppiness and time. Search the forum for more details, it has been covered to death.
I've seen a lot of academic and anecdotal evidence that leveraged equity ETF's have not been "eaten up by chopiness and time", at least in the modern era where borrowing costs have been low. I'm talking 2x or 3x S&P or Nasdaq ETF's (my preference is S&P) with a historical upward bias, not leveraged commodity ETF's that have big structural problems like contango, etc. Or inverse ETF's on upward biased markets. Those get crushed into oblivion. Most of the evidence I've seen states that the ideal leverage is somewhere around 1.7-1.9 on equities. The 3x versions have crushed their 1x and 2x counterparts, but they've only been around since early 2009, which was nearly a perfect time to start owning 3x. Anything longer term on 3x ETF's would need to be simulated. I've seen some long term simulations of 2x ETF's dating back to at last 1950. Personally, I like to leveraged ETF's rebalanced with cash or bonds to reduce my leverage. The re-balancing affect is good for capturing volatility. A real world example of a leveraged portfolio of 60% SSO (2x S&P) and 40% BTTRX (zero coupon bond fund) rebalanced annually since 2007 (first year for SSO) has beaten 100% SPY by over 4% CAGR, which includes the bear market of 08/09. I think DCA'ing into a falling market with a leveraged ETF would make a lot of sense too, because you would be buying in at extremely low prices. Shares of SSO bought on 2/2/09 for example would be up +970% vs SPY shares bought the same day which are currently up +296%. With DCA, volatility is your friend.
The problem, as @sss12 mentions, is that nearing your "retirement" you will freak out by that same volatility. Because soon you will need that money to survive.... you can't lose a big chunk, since you need it. That's why any financial advisor will say that your investment vehicle will depend on which stage of life you are in, together with what your retirement will look like (or how you want it to look like). If you're just starting adult life... put it in higher risk assets. If you late early 60's... you should almost be 50/50 stocks/bonds. 70 you need more risk-averse, regularly yielding assets. So, yes ... maybe a leveraged investment makes sense when you're young... if you're fine with a 90% drawdown lasting a few years... but if you've planned to use it, you will be screwed. If that 3x ETF blows up 10 or 5 years before you need the money.... you are royally f$%ked... But, anyone their own dealings. I refer to another post of mine... if you're young and don't have much capital, shoot for the stars. But if you're a bit older and have decent net worth, you would want to focus more on keeping that capital.
I actually do both. I have a non retirement trading account and I aggressively fund my retirement account via dollar cost averaging with a 4% of my salary company match. Assuming 8% average yearly returns (12% is a bit optimistic) I should have about 2 million once I reach retirement. I currently have my preferences set to "Ultra High Risk" where my 401K portfolio is rebalanced once per quarter and divided amongst mainly low cost stock mutual funds.