Hi everyone,


Do any of you hold leveraged ETFs as part of your portfolio? I have been thinking of allocating around 10% of my $ to leveraged ETFs (will wait until the market corrects itself as it seems overpriced at the moment). Proshares offer quite a few leveraged ETFs and they have been achieving some very solid returns over the last 5 years (40-50% pa annualised).

For those that don't mind the volatility, they may be a good option. As leveraged ETFs compound daily, violability drag can dramatically reduce returns. For all those disbelievers, here is an interesting article calculating returns based on daily compounding of different indexes at different levels of leverage. For those who don't wish to read the article, the conclusion is that x2 leverage is the optimum level of leverage for the best returns over the long term. Here's a link to the article for those interested:

http://ddnum.com/articles/leveragedETFs.php

Anyway it would be interesting to see people's thoughts on the subject and to hear from anyone who actually invests in leveraged ETFs. Pity the FIF rules make international investment above 50k pretty unattractive.