I have invested in leveraged funds for over 20 years. Although they have risk, I am retired and would like to preserve wealth. I do this through leveraged funds. By investing 50% of my invested cash in a 2x leveraged fund, I get a return that is less than 2X in a given year but over a long period of time, I am likely to get more than 2X due to compounding. I understand these instruments are recommended for short term holding because of volatility decay. Over the last ten year period, the SPY ETF has had a 13.56% return while SSO 2X leveraged ETF has returned 22.97%. This represents a 1.7X return with 0.3X lost through volatility decay. A $10,000 investment in SPY after this 10 year period would be worth $35,666 with 100% of this investment at risk. A $5,000 investment in SSO and keeping $5,000 in cash would be worth $44,533 with a risk of 50% of my original principle of $10,000. So much emphasis is placed on the volatility decay risk of these instruments while the effect of compounding at a higher interest rate that more often than not offsets the volatility decay is ignored especially over a long period of time. I beg of you to please do not punish those of us who understand these products for the sins of the unwise. Reference: https://www.afrugaldoctor.com/home/leveraged-etfs-and-volatility-decay-part-2
Melvin Law Comment On Regulatory Notice 22-08
I have invested in leveraged funds for over 20 years. Although they have risk, I am retired and would like to preserve wealth. I do this through leveraged funds. By investing 50% of my invested cash in a 2x leveraged fund, I get a return that is less than 2X in a given year but over a long period of time, I am likely to get more than 2X due to compounding. I understand these instruments are recommended for short term holding because of volatility decay. Over the last ten year period, the SPY ETF has had a 13.56% return while SSO 2X leveraged ETF has returned 22.97%. This represents a 1.7X return with 0.3X lost through volatility decay. A $10,000 investment in SPY after this 10 year period would be worth $35,666 with 100% of this investment at risk. A $5,000 investment in SSO and keeping $5,000 in cash would be worth $44,533 with a risk of 50% of my original principle of $10,000. So much emphasis is placed on the volatility decay risk of these instruments while the effect of compounding at a higher interest rate that more often than not offsets the volatility decay is ignored especially over a long period of time. I beg of you to please do not punish those of us who understand these products for the sins of the unwise. Reference: https://www.afrugaldoctor.com/home/leveraged-etfs-and-volatility-decay-part-2