Most of the 3x ETFs compound daily, it’s true. And there are costs to this—more from the fees than the compounding itself. But that doesn’t automatically make them a bad long-term investment (even though I’ve heard that said). 3x funds are much more accessible than other kinds of leverage. You don’t need a margin account. You don’t need options. You can even trade them in an IRA where you don’t have to pay taxes. That more than makes up for it.
Most brokers charge way too much to consider using margin loans long term. IB does happen to be more reasonable, but loans are still not for free. And to get the best rates, you need a big account. You can’t even get to 2x leverage on a Reg-T portfolio using margin loans. (On components sure, but not the whole portfolio, or you’ll get a margin call next dip.) For portfolio margin, you need at least $100,000 at most brokers, and preferably a lot more so you don’t get downgraded and margin called at the worst time. It’s great if you can afford it, but one should start investing long before saving up that much.
Most of the 3x ETFs compound daily, it’s true. And there are costs to this—more from the fees than the compounding itself. But that doesn’t automatically make them a bad long-term investment (even though I’ve heard that said). 3x funds are much more accessible than other kinds of leverage. You don’t need a margin account. You don’t need options. You can even trade them in an IRA where you don’t have to pay taxes. That more than makes up for it.
Most brokers charge way too much to consider using margin loans long term. IB does happen to be more reasonable, but loans are still not for free. And to get the best rates, you need a big account. You can’t even get to 2x leverage on a Reg-T portfolio using margin loans. (On components sure, but not the whole portfolio, or you’ll get a margin call next dip.) For portfolio margin, you need at least $100,000 at most brokers, and preferably a lot more so you don’t get downgraded and margin called at the worst time. It’s great if you can afford it, but one should start investing long before saving up that much.