Berkshire Hathaway Inc (BRK.B)

[Duma]

It is a myth that holding a 2x or 3x fund long term will not perform as well as a 1x fund. It all depends on what the prices are doing. If they are increasing as they have been doing for the last 5 years except for 2015, it is much to your advantage to hold 2x or 3x funds.

When I calculate gains with 2x or 3x fund I always divide by 2 or 3, so that I can compare with 1x funds. From the table below, here are the 5 year gains.

 
  
 SPY	99.4%	SSO	118.4% 
 IWM	99.2%	TNA	124.8% 
 QQQ	125.4%	TQQQ	216.2%

The math is a little tricky, so I also showed how $3000 invested in IWM would have gained $2976; while only $1000 invested in TNA would gain $3744.

In my case I hold TNA a large part of the time, so I can leverage my money, not because I want to be 300% invested. I like to be invested near 150% for IWM. If I use TNA, I only need to use half of my cash to do that. This leaves me with the other half to invest in other things.

The way I trade however even enhances the use of 3x funds even more. I actively trade a daily chart, so I am only in the market when it is generally going up. This makes the 3x gain vs 1x even greater. For 2016, IWM yielded 38.8% while TNA gained 48.9%. Just buying and holding IWM gained only 21.6%, so a big improvement.

It takes a bit to wrap your head around these numbers, but they are real. But for sure holding 2x or 3x funds in a down turn is going to amplify the losses.