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Understanding Levered ETFs and Geometric Returns

I don't see an explanation of why the expected geometric return of an inverse ETF isn't just -1 times the return of the equally levered long ETF.
Jan 05 06:34 am |Rating: 0 0 |Link to Comment |View article
Long Term Investors Should Avoid Leveraged ETFs

It's a good article. It made me think. The best description of it is an illustration of the volatility-risk connection.
Dec 06 20:31 pm |Rating: 0 0 |Link to Comment |View article
Long Term Investors Should Avoid Leveraged ETFs

This article describes some of the math behind equating volatility with risk. It doesn't mean that 2x ETf's are bad for long-term investing, just that they are riskier.

Compare a regular stock-market index with a theoretical "0.5x Anti-leveraged ETF":
ABC index: $100
XYZ ETF: $50-index + $50-cash

The index drops 25%.

ABC: $75
XYZ: $88 ($38-index + $50-cash)

Rebalance XYZ: $44-index + $44-cash

The index gains 33%, returning the index to its starting point. In other words, a flat but volatile market....

ABC: $100
XYZ: $103 ($59 + $44)

Ha-ha! This proves you should never hold stocks for the long-term! Or not.

Dec 06 09:25 am |Rating: 0 0 |Link to Comment |View article
A Skeptic on Leveraged ETFs

As an investor, I'm mainly concerned with biased slippage. If the ETF underperforms in one direction but not the other, then there is a change in the risk. If the mis-performance is equally bearish and bullish, I'm not so concerned.
Nov 28 22:03 pm |Rating: +1 0 |Link to Comment |View article

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