Hi Jack...Re: 2X and 3X funds.
Think it is really difficult to make a "long-term" comparison between the leveraged fund and its underlying index. IMO, the reason is because the leveraged fund is rebalanced on a daily basis.
Here is another comparison to ponder.
IWB - Russell 1000 Index ETF
BGU - 3X the Russell 1000 Index ETF
SPY - S&P 500 Index ETF
SSO - 2X the S&P 500 Index ETF
Went over to PerfCharts to see how these ETFs compared since the market low on March 9, 2009. Here are the results:
IWB - +65.56%
BGU - +291.43% (4.45 times the underlying index ETF instead of 3 times the underlying index tracking ETF)
SPY - +63%
SSO - +156.62% (2.59 times the underlying index ETF instead of 2 times the underlying index tracking ETF)
Pretty sure all this has to do with daily rebalancing of the leveraged index. However, the math whiz types who frequent this forum would probably be able to give a much better answer than I just did.
Someone on this forum recently remarked that the 3X funds were the closest we could come to Lichello's 10-8-5-4-5-8-10 volatility, or words to that effect. There might be something there. Others have remarked that some brokers won't even sell these leveraged funds. Recently I had to sign a statement at Fidelity Brokerage that I understood these were very volatile investments when I made some short-term trading purchases of BGU and TNA.
Anyway, I find these leveraged funds to be interesting. Something out of the ordinary. Evidently others find them to be worthwhile investments. Over at Yahoo it shows BGU's average daily volume to be 8.5 million shares.
Best regards,
Ray
