Hacker News Reader

HNHacker News

Top New Best Ask Show Jobs

Comment by throwaway98797 | Hacker News Reader

Full thread

throwaway98797·

Good stuff, excpet:

<<I've put a large chunk of my money in leveraged index funds and etfs>>

This is dangerous advice if you go all in on this.

View on HN

I believe the available evidence suggests that over the long term, a small amount of leverage increases returns. Obviously it increases volatility as well, but if your time horizon is long, you can cope with that.

You do not want to invest in ETFs that are themselves leveraged & rebalance daily however, that’s going to eat all your money if you hold them for any length of time - those products are designed to be held for short periods only.

SPXL also has an expense ratio over 1%, which will eat away at earnings unless in the best of bull rushes (now).

Leveraged EFTs outperform VTI/VOO (in terms of total return) over 30-40 year investment horizons. Period.

Now, the risk (potential one-year downside) is not for everyone.

A little bit of leverage as others have commented is fine.

The problem happens if there’s 51% drop in 2x levered fund.

There’s a reason the fund the article’s OP is in started in 2008 and not 40 years ago.

The expense ratios of leveraged ETFs are nothing compared to the volatility drag. There are far cheaper and more effective ways than leveraged ETFs for buy-and-hold investors to obtain leverage, notably LEAPs and index futures. (Disclaimer: Not investing advice, do your own research, etc.)

Reply on news.ycombinator.com