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Long Term Leveraged ETF Performance

Long Term Leveraged ETF Performance

An Analysis of Theoretical Simulated vs Actual Performance

The long-term performance of leveraged ETFs is analyzed. Leveraged ETF performance is compared to simulated ideal leverage and underlying non-leveraged indexes, and a number of characterizations are drawn from the analysis.

Some unexpected results, both in short and long-term performance, are presented. Also, an ETF Leverage Simulator was developed to interactively demonstrate different leverage factors, expense ratios, and their effects on performance.

See the report Long-Term Leveraged ETF Performance (rpubs) or implementation ETF Leverage Comparator (github) for more details.

ETF Leverage Simulator

ETF Leverage Simulator

The ETF Leverage Simulator synthesizes long-term leveraged ETF returns.

Leveraged ETF’s are exchanged traded funds that use derivatives and debt to magnify the returns of an underlying index. Such funds apply a leverage multiplier (typical 2x or 3x) to amplify an index’s actual returns on a daily basis.

This application allows the user to select an underlying index and then run a simulation to see how an ETF (applying daily leverage to the underlying index) would have performed over the same period.

For more details, see the application ETF Leverage Simulator (shiny.io), implementation ETF Leverage Simulator (github) or detailed analysis Long Term Leveraged ETF Performance.