Are Triple Leveraged Etfs Suitable For Long-Term Holding?

Triple leveraged ETFs marketed past times discussed before. In other words, the fund managing director has to sell stocks (or futures) when in that location is a loss, in addition to purchase stocks (or futures) when in that location is a arrive at inwards the marketplace grade value of the portfolio, inwards gild to hold a constant leverage ratio of 3. This is besides identical to what Kelly formula would prescribe, a methodology discussed extensively inwards my book, if the optimal leverage f were indeed 3.

However, the optimal f for such marketplace grade indices are quite a fight lower than 3. Both Russell M in addition to 2000 bring f at nearly 1.8. This way that since the funds are leveraged at 3, in that location is a existent possibility that sustained losses could ruin the funds (i.e. NAV going to zilch unless novel working capital alphabetic quality is injected, which, er..., reminds me of a Ponzi scheme). So I would fence that non alone should an investor non concur these funds for the long term, the funds themselves should non endure leveraged at this level. Otherwise, it is a disaster waiting to happen.