A.I.M. Users Bulletin Board

[ls7550]

Re: Leveraged Funds

Hold half as much in a 2x as you would the non-leveraged, or a third of the $ amount in a 3x leveraged ETF as you'd hold in the non-leveraged.

More in 'cash', and if that cash does well (higher reward than what the leveraged ETF pays to borrow) you're quids-in.

Another benefit for 'aliens' is that dividends are taxed at 30% (US dividend withholding tax (reduced to 15% under UK/US tax treaty if known to the US (W8BEN)). Often leveraged ETF's pay less dividends, a form of dividend mapped to cash (which can be held domestically more tax efficiently). i.e. tax efficiencies (lower costs, higher reward).

If you rebalance half in 2x, half in cash once/year or so, then that combination tends to track 100% in the non-leveraged reasonably well.