Not sure what to say about this. However in the Nas crash after the .com bubble, one particular leveraged mutual fund (a Rydex fund, and if I recall correctly it was "only" 2x leverage) lost -97.5% of it's value. No recovering from that. Tragic story around that too for one financial advisor who "bought the dip" and decided to "hang on and ride it out" through the bear market.
Maybe you're thinking "linear" when you should be thinking "log"?? (I trust my calculations are correct. I ran them twice... on my ancient TI BA-II)
I must definitely be thinking about it wrong, linear versus log I guess it is. Here is $100 growing at 1% a day, and $33.33 growing at 3% a day. Yea, its the log thing for sure. 100 33.33 101 34.3299 102.01 35.359797 103.0301 36.42059091 104.060401 37.51320864 105.101005 38.6386049 106.1520151 39.79776304 107.2135352 40.99169593 108.2856706 42.22144681 109.3685273 43.48809022 110.4622125 44.79273292 111.5668347 46.13651491 112.682503 47.52061036 113.809328 48.94622867 114.9474213 50.41461553 116.0968955 51.927054 117.2578645 53.48486562 118.4304431 55.08941158 119.6147476 56.74209393 120.810895 58.44435675 122.019004 60.19768745 123.239194 62.00361808 124.471586 63.86372662 125.7163018 65.77963842 126.9734649 67.75302757 128.2431995 69.7856184 129.5256315 71.87918695 130.8208878 74.03556256 132.1290967 76.25662943 133.4503877 78.54432832 134.7848915 80.90065816 136.1327404 83.32767791 137.4940679 85.82750825 138.8690085 88.40233349 140.2576986 91.0544035 141.6602756 93.7860356 143.0768784 96.59961667 144.5076471 99.49760517 145.9527236 102.4825333 147.4122509 105.5570093 148.8863734 108.7237196 150.3752371 111.9854312 151.8789895 115.3449941 153.3977794 118.805344 154.9317572 122.3695043 156.4810747 126.0405894 158.0458855 129.8218071 159.6263443 133.7164613 161.2226078 137.7279551 162.8348338 141.8597938 164.4631822 146.1155876 166.107814 150.4990552 167.7688921 155.0140269 169.4465811 159.6644477 171.1410469 164.4543811 172.8524573 169.3880126 174.5809819 174.4696529 176.3267917 179.7037425 178.0900597 185.0948548 179.8709603 190.6477004 181.6696699 196.3671315 183.4863666 202.2581454 185.3212302 208.3258898 187.1744425 214.5756665 189.0461869 221.0129365 190.9366488 227.6433245 192.8460153 234.4726243 194.7744755 241.506803 196.7222202 248.7520071 198.6894424 256.2145673 200.6763368 263.9010043 202.6831002 271.8180345 204.7099312 279.9725755 206.7570305 288.3717528 208.8246008 297.0229053 210.9128468 305.9335925 213.0219753 315.1116003 215.1521951 324.5649483 217.303717 334.3018967 219.4767542 344.3309536 221.6715217 354.6608822 223.8882369 365.3007087 226.1271193 376.25973 228.3883905 387.5475219 230.6722744 399.1739475 232.9789971 411.149166 235.3087871 423.4836409 237.661875 436.1881502 240.0384937 449.2737947 242.4388787 462.7520085 244.8632675 476.6345688 247.3119001 490.9336058 249.7850191 505.661614 252.2828693 520.8314624 254.805698 536.4564063 257.353755 552.5500985 259.9272926 569.1266014 262.5265655 586.2003995 265.1518311 603.7864115 267.8033494 621.9000038 270.4813829 640.5570039 273.1861968 659.773714 275.9180587 679.5669255 278.6772393 699.9539332 281.4640117 720.9525512 284.2786518 742.5811278 287.1214384 764.8585616 289.9926527 787.8043184 292.8925793 811.438448 295.8215051 835.7816014 298.7797201 860.8550495 301.7675173 886.680701 304.7851925 913.281122 307.8330444 940.6795556 310.9113749 968.8999423 314.0204886 997.9669406 317.1606935 1027.905949 320.3323004 1058.743127 323.5356234 1090.505421 326.7709797 1123.220584 330.0386895 1156.917201 333.3390764 1191.624717 336.6724671 1227.373459 340.0391918 1264.194663 343.4395837 1302.120502 346.8739795 1341.184117 350.3427193 1381.419641 353.8461465 1422.86223 357.384608 1465.548097 360.9584541 1509.51454 364.5680386 1554.799976 368.213719 1601.443976 371.8958562 1649.487295 375.6148148 1698.971914 379.3709629 1749.941071 383.1646725 1802.439303 386.9963193 1856.512482 390.8662824 1912.207857 394.7749453 1969.574092 398.7226947 2028.661315 402.7099217 2089.521155 406.7370209 2152.206789 410.8043911 2216.772993 414.912435 2283.276183 419.0615594 2351.774468 423.252175 2422.327702 427.4846967 2494.997533 431.7595437 2569.847459 436.0771391 2646.942883 440.4379105 2726.35117 444.8422896 2808.141705 449.2907125 2892.385956 453.7836196 2979.157535 458.3214558 3068.532261 462.9046704 3160.588229 467.5337171 3255.405875 472.2090543 3353.068052 476.9311448 3453.660093 481.7004562 3557.269896 486.5174608 3663.987993 491.3826354 3773.907633 496.2964618 3887.124862
Hmmmmm. But whatever it was, the underlying lost a ton too, right, like 45% or something crazy? Or wait, maybe not? Maybe it lost far less than this and the log thing works in reverse and absolutely brutalizes you in a down market far more than simply holding 200% (in a 2x ETF) or 300% (in a 3x ETF)?
Haha, ok good. What all these calculations are leading me to believe is that the drag on at least some of the leveraged funds, including TQQQ, is not that much at all, and rather than putting 100% of your money in QQQ (assuming you had a long time until retirement and want to let it ride), just put like 10% of your money in TQQQ and use the other 90% on whatever you want. Even if QQQ gets cut in half and TQQQ goes to almost zero, you are still down max 10%. AND you then have plenty of money to pile into TQQQ at that time and make the investment of a lifetime.
The cost of leverage drag during a bull phase doesn't seem like much with the high performance, but in a long bear market... it's a killer! We've got a whole generation of stock players and money managers who have never experienced a bear market. There will be screams of despair and cries of agony when they do.
Hmmm, are you saying that you just feel it more in a bear market since in a bull market you are still making a killing and don't notice the slight drag, or are you saying that the actual "drag" increases in a bear market, i.e. the cost of getting that 3x leverage actually goes up in a bear market?
I don't know if the expense costs for whatever leverage vehicles used actually go up, but they have to pay for it.. and it keeps expiring worthless... only to be bought again and again expiring worthless... yadayada. Those costs have an compounding negative effect too. The time it takes for a bear to run its course is a big additional negative.
TQQQ is still in an 80% drawdown from its tech bubble peak, even though the Nasdaq is up 270%. That said, if you had bought it any time other than a few months during the peak of the bubble, you'd be quite profitable today. Buying and holding TQQQ is a low alpha strategy. You are better off using options, futures, or margin for leverage. Of course, if you want to use leverage, you would be wise to have some market timing strategy that are willing to stick to.