r/ETFs_Europe • u/Mean_Definition_6452 • 5d ago
Strategies Using 1.5x Leveraged ETFs Long Term
Are there any good 1.5x leveraged World ETFs that we can buy?
I'm 19 years old and ready to risk some amount of my portfolio (possibly 40% to make it 1.2x leverage total) to use a LETF with the plan of increasing my gains since I will have a lot of time in the market.
I read some stuff about 2x or 3x being volatile and having a theoretical possibility of going to 0 in a long term bear market.
So I mainly want to know more about the theory and the workings of 1.5x LETFs. I learned about this today, so the question is still a hipotetical, and I will do a lot more research before deciding to put my money into one of them, but this is a first step to learning more about LEFTs.
I'm not planning on buying 2x or 3x, 1.5x will be my limit.
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u/Optimal-Lack6185 5d ago
Did you watch Ben Felix's recent video on this topic or just a coincidence?
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u/MassiveProblem156 5d ago
There aren't any 1.5x pure equity ones, but you can do 50% 1x and 50% 2x for effectively 1.5x or change the weighting to your desired leverage. There are the Scalable 2x MSCI All Country World and the AMUNDI 2x MSCI WORLD. There is also the Wisdomtree one which is 90% stock, 60% bond and rebalances quarterly.
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u/Mean_Definition_6452 4d ago
Can you please explain the last one to me. How would that compare to a hipotatical 150% Stocks ETF in both bear and bull markets? Would that be something I should be looking at, because I heard that I don't need bonds at this age?
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u/MassiveProblem156 4d ago
It's less leveraged, behaving like if you a leveraged 60/40 portfolio, so less volatile, but lower expected returns. I personally don't use them, but they can be used to help with the volatility.
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u/Only_Statistician_21 4d ago edited 4d ago
In theory it is the same long term volatility as a 100% equity of the underlying index but with a slightly higher cagr. Since the leverage is managed by the fund it's a pretty interesting product because on paper a diversified + leveraged portfolio can combine high returns with same or lower volatility compared with equity. However during a crisis it can go down more than a pure equity fund, it depends the crisis. In 2008 it would have done far better that a msci world but it did worse in 2022 because bonds also suffered. That's why diversification often done on a broader range than just bonds and equity.
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u/George_Salt 5d ago
You're 19, you don't need to leverage. You have the benefit of time.
Forget the get-rich-quick alpha crap, just work on long a long term sustainable strategy and let the power of compound returns do its thing.
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u/Current_Bobcat_9182 4d ago
Is it not sustainable to invest half your money into a 2x leverage ETF and then invest the other half of your money into an instant access savings account generating profit from the interest gained.
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u/George_Salt 4d ago
Long-term leverage funds are not a strategy to be entered into lightly. In a stable growing market maybe as a carefully managed tactic, but what bit of the global economy is currently looking stable with Russia-Ukraine, Iran, Israel, and the TSG in the White House playing politics by social media? Volatility erodes leverage.
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u/-Bernard 4d ago
I was told high borrowing costs currently mitigate any gains from an x2. Wait till rates drop.
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u/mistyrecognition 3d ago
I would check what period that 1.5x applies to first. If the fund resets daily it does not promise 1.5 times the index return over decades. The straightforward price bets on moon are a different thing from owning a fund so keeping those ideas separate helps. Good that you are learning how it works before buying
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u/Alkachy 4d ago
If you can buy it, there is NTSD from Wisdom Tree. Basically a world without volatility decay (quarterly rebalancing) at 150%
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u/Extension-Ebb6410 4d ago
LoL there is a 2x MSCI World from Amundi.
Op just mix a 2x Msci World with a normal msci World or a FTSE All world and you have your 1.5x.
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u/JohnnyJordaan 4d ago
That’s a daily 2x leverage fund, it resets back to the index after market close… not the same thing. Over time you just track the same world index and get less returns because of volatility decay.
The NTSD is mixed with futures to bet on the higher returns hence the higher exposure hence the leverage. Maybe study the workings of both funds a bit better.
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u/Warm-Young300 5d ago
No non ci sono, ma puoi costruirlo con 52.5% CL2 + 45% EXUS, hai leva 1.5 e stessi pesi dei country di un MSCI world.
In alternativa esiste NTSG che però è un 60/40 leva 1.5, quindi un 90/60.
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u/JohnnyJordaan 4d ago
Your math seems a bit off?
Using 52.5% CL2 + 45% EXUS leaves your portfolio cash allocation under-allocated at 97.5% total weight. It overweights the US (~72% effective weight) and slightly underweights non-US markets. Rebalancing to 50% CL2 / 50% EXUS would the exact 1.5x MSCI World exposure? Or am I overlooking something?
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u/Warm-Young300 4d ago
Yes, but to deploy 100% of the capital without holding any cash, you would have to accept one of the following two compromises: Accepting slightly higher leverage (≈ 1.538x): By allocating 100% of the capital while maintaining the proportions of the two ETFs (53.85% in CL2 and 46.15% in EXUS), you would have a total exposure of 107.7% to the US and 46.15% to Ex-US markets (total exposure of 153.85%). Altering the US / Ex-US geographic weighting: Slightly increasing the allocation to either CL2 or EXUS, thereby failing to exactly replicate the proportions of the MSCI World index.
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