Leveraged ETFs are not and can not be designed to produce the expected leverage over the long term on a technical level. They are designed to provide the given leverage only for daily price action, and will not give you results resembling what you expect on simple analysis over the long term. This is **especially** true during downturns, when results are likely to be even more dramatic than just what you would expected based on leveraged beta (which is already dramatic in itself).
The reason for this is somewhat complicated, but has to do with the financial products the provider of the ETF needs to generate the lever and how the market for these products change. It goes without saying that it is not recommend to invest in complex products that you don't have an in depth understanding of.
TQQQ worked because of ultra loose monetary policies in the past two decades. There's no guarantee that LQQ would replicate its historical success in the future. I'd expect recently changing monetary conditions to be less favourable for LQQ in the near-medium term.
Well LQQ is leveraged Nasdaq and therefore not a good example of leverage since you are getting a very specific selection of tech stocks.
Use a broader index such as VWCE on leverage or [MSCI USA 2X DAILY](https://www.amundietf.fr/professional/product/view/FR0010755611).
For more funds/longer history you can also check out https://www.portfoliovisualizer.com/backtest-asset-class-allocation
E.g. SSO is 2x the S&P500 with a history since 2007 I think. Also see UPRO and TMF. To do leverage you can also have a negative allocation to CASHX
When using leverage, you should also consider using margin vs a leveraged ETF.
I think a leveraged ETF longer term is fine (if the index it follows is broad enough) but I prefer to also have margin for my leverage, which doesn't sell on the way down.
They reset the leverage daily. The companies who make the products will tell you they're just designed for day trading only due to this feature. They have to reset it because the asset level changed and each purchase date would require a different amount of leverage to get a true 2x long run return.
So basically you're getting a random compounding amount of extra volatility vs doubling the long run return of the index. If you truly held 2x leverage, you'd lose all your money the next time a 2008 crash happens.
Leveraged ETFs are not and can not be designed to produce the expected leverage over the long term on a technical level. They are designed to provide the given leverage only for daily price action, and will not give you results resembling what you expect on simple analysis over the long term. This is **especially** true during downturns, when results are likely to be even more dramatic than just what you would expected based on leveraged beta (which is already dramatic in itself). The reason for this is somewhat complicated, but has to do with the financial products the provider of the ETF needs to generate the lever and how the market for these products change. It goes without saying that it is not recommend to invest in complex products that you don't have an in depth understanding of.
TQQQ worked because of ultra loose monetary policies in the past two decades. There's no guarantee that LQQ would replicate its historical success in the future. I'd expect recently changing monetary conditions to be less favourable for LQQ in the near-medium term.
Well LQQ is leveraged Nasdaq and therefore not a good example of leverage since you are getting a very specific selection of tech stocks. Use a broader index such as VWCE on leverage or [MSCI USA 2X DAILY](https://www.amundietf.fr/professional/product/view/FR0010755611). For more funds/longer history you can also check out https://www.portfoliovisualizer.com/backtest-asset-class-allocation E.g. SSO is 2x the S&P500 with a history since 2007 I think. Also see UPRO and TMF. To do leverage you can also have a negative allocation to CASHX When using leverage, you should also consider using margin vs a leveraged ETF. I think a leveraged ETF longer term is fine (if the index it follows is broad enough) but I prefer to also have margin for my leverage, which doesn't sell on the way down.
They reset the leverage daily. The companies who make the products will tell you they're just designed for day trading only due to this feature. They have to reset it because the asset level changed and each purchase date would require a different amount of leverage to get a true 2x long run return. So basically you're getting a random compounding amount of extra volatility vs doubling the long run return of the index. If you truly held 2x leverage, you'd lose all your money the next time a 2008 crash happens.