leveraged ETFs vs. leveraged Mutual Funds

Discussion in 'ETFs' started by stevenpaul, May 31, 2009.

  1. We all know that leveraged ETFs have a tendency to exhibit the phenomenon of price decay, when compared to the underlying indexes they track. Now, do leveraged mutual funds (as opposed to ETFs) also suffer from the same problem of decay? I never hear any talk about the Direxion non-ETF leveraged funds suffering from decay. Does anyone know how these funds perform over time relative to their underlying indexes?
  2. Leveraged mutual funds that provide leveraged multiples of daily returns have the identical problem of leveraged ETFs. It is not actually decay, it is the simple mathematics of compounding positive and negative leveraged daily returns over time.
  3. There is a "cost" to leverage.... therefore, best to play on a daily or swing basis rather than long term.