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I invested in Ayalon Extreme S&P 500 which is leveraged S&P.

But its graphic does not follow the graphic of S&P. This is S&P which recently improved historic maximum: enter image description here And this is the leveraged ETF which did not even reach the level of the last year yet: enter image description here

I expected it to grow 3x the original index.

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  • You should take the time to examine how the leverage is constructed. You should never buy things you don't understand. – Flux Aug 14 '20 at 9:58
  • @Flux well, when the market was down in March, I had no time to think and rushed to buy whatever was more powerful instrument. – Anixx Aug 14 '20 at 9:59
  • That is exactly what you should not do. As you can see, you bought something that you probably would not have bought if you had known the details. In fact, reading the Wikipedia article on ETFs (see "Leveraged ETFs") would have told you the risks. – Flux Aug 14 '20 at 10:04
  • @Flux well, no, I still would buy it, it grew about 2x since I bought it and if I bought it when I wanted initially it would be even more (the bank staff troubled with technicalities which turned out being the ETF number been entered with one excessive digit, and finding out this took many days) – Anixx Aug 14 '20 at 10:07
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    The performance of an inverse ETF or a leveraged ETF will depend on the trend of the underlying index or the lack thereof. In strong continuous trends, the leveraged ETF often outperforms its leverage factor. If the underlying is choppy, it underperforms. Read this question and some of the answers and you might get a better fell for it. – Bob Baerker Aug 14 '20 at 10:23
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From the March low the ETF is up nearly 200%, while the SP500 is up about 50%. The charts will not look the same as they have different share price.

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  • I still feel tricked upon... even though I have about 90% income. Is there a law that say the ETF will return to the pre-crisis level? Is it possible the ETF will fool investors? – Anixx Aug 14 '20 at 3:09
  • Also, it seems, ETF dropped more than 3x of S&P in the beginning of the crisis? Does it mean it has more than 3x risk? – Anixx Aug 14 '20 at 3:12
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    Yes. How do you think a 3x ETF works? It is not magic - it MODELS via derivatives. Sometimes - under extreme conditions - those models are not perfect. – TomTom Aug 14 '20 at 7:29
  • @TomTom should I choose a better 3x s&p fund in the future? I mean, do they differ in how they implement this modelling? – Anixx Aug 14 '20 at 9:13
  • THey obviously DIFFER - there is no legal authority stating what is a stnadard, so they all will use some better or worse approach. I am not an advisor,so I can not tell you which one to choose - particualrly becuase I Do not deal in ETF. Like at all - if I want leverage, I use futures. Just saying that NO modelling will be perfect and the ALTENRATIVE is 3x as 3x (i.e. credit and buying 3x the shares) and THAT comes with HIGH interest every month (which is why those funds use derivatives). Choose your poison. – TomTom Aug 14 '20 at 9:15

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