9Mon·

Super interesting 2x MSCI WORLD

20.01

LVW

MSCI World (2x) Leveraged UCITS ETF Acc

Bought x50 at €4.48

€224.00

21 Comments

Deleted User

9Mon

Comment was deleted

TotallyLost@TotallyLost

9Mon

@Madhatter5566 uhhhh why not, of course there is a path dependency, but this can be reduced by means of a savings plan.
There are also studies on this, but they make it clear that this is only suitable for "risk-tolerant investors".
Young people in particular who have a lot of time and not yet a lot of money can take advantage of this.

https://www.netspar.nl/wp-content/uploads/paper_Balter_Garcia_Schweizer.pdf

We argue that leveraged market exposure over long horizons can be easily achieved with LETFs
and we include these instruments in a continuous time portfolio optimization model based
on Merton (1971). This model shows that welfare gains from lifting the leverage constraint
are sizable for risk-tolerant investors. The continuous specification seems to hold well when
considering the challenges of leveraging in a discrete time world, and it seems suitable for longterm investors that are sufficient risk-tolerant. Yet this limitation is typically inconsequential:
it is mostly risk-tolerant investors who are interested in overleverage. Lifecycle models could
also incorporate LETFs to compensate for the illiquidity of human capital, although risk-averse
investors would reduce their leverage ratios in comparison to continuous model predictions, as
discrete leverage risks are more unpalatable to them

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Deleted User

9Mon

Comment was deleted

TotallyLost@TotallyLost

9Mon

@Madhatter5566 Sorry, I don't understand what you're getting at?

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Deleted User

9Mon

Comment was deleted

TotallyLost@TotallyLost

9Mon

@Madhatter5566 Yes, the losses are higher with leverage2.
But so are the gains. And in the long term, leveraged beta brings a higher return than unleveraged beta, as long as the leverage is not too high.
However, the older you get, the more you should reduce the leverage. Keyword: lifecycle investing.

I refer again to the study I linked to above.

But to say across the board "Daily leveraged means that this is not a long-term investment." is wrong as far as I know.

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C@garcla

9Mon

@Madhatter5566 I can’t find the study right now but I read that a 2x etf would have outperformed 1x etfs for most of indexes except japan. Msci 2x index showed that it would have survived the great financial crisis, there is still the possibility of it going to 0 but you would need a 50% drop in a single day, which is of course possible but highly unlikely. If you allocate a small percentage when you are young you can make your capital work more and once you are older you can scale back.
Additionally, you can actually DECREASE risks with leverage because using a 2x fund frees up capital you can add in an uncorrelated/lower correlation asset like gold or commodities

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C@garcla

9Mon

@Madhatter5566 I can’t find the study right now, but I read that a 2x ETF would have outperformed 1x ETFs for most of the indexes except Japan. MSCI 2x index showed that it would have survived the Great Financial Crisis. There is still the possibility of it going to 0, but you would need a 50% drop in a single day, which is of course possible but highly unlikely. If you allocate a small percentage when you are young, you can make your capital work more, and once you are older, you can scale back.

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Deleted User

9Mon

Comment was deleted

C@garcla

9Mon

@Madhatter5566 you can allocate 5-10% when you are young, you have low capital and you have to make it work. Once you are older you can scale back. That’s how lifecycle investing works. And through a risk parity portfolio you can use leverage to decrease risk, you have to look at the overall portfolio not the single asset

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TotallyLost@TotallyLost

9Mon

@Madhatter5566 What total loss? For a total loss, the market would have to fall by 50% in one day.

The main risk is the volatility and the "time under water" after a crash, not the total loss.
And a young person can ride out both volatility and "time under water" if he or she has the stomach for it.

In addition, the crash is ONLY bad at the beginning if you go in with a large amount that you can't earn so quickly. (inheritance, for example)
However, if you have hardly any savings and are just building up your assets, the leverage becomes much more interesting.

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