One-Fund With 22% CAGR Over 50+ Years, And Why You Should Avoid It | Seeking Alpha
Leveraged equity funds perform very strongly over the long term. However, they also have enormous swings that are far too large for a majority of investors.
Leveraged equity funds can be a part of a long-term portfolio, provided that the risks they present are balanced with other assets. For example, a risk-weighted portfolio (including but not limited to a risk-parity portfolio) may derive substantial additional returns from holding leveraged equity funds.
I do not recommend long-term investments in UPRO or SPXL, except in the context of a well-designed portfolio. While 22.6% CAGR is very attractive, 17-year, 97% downturns are going to ruin most investors; few will manage to endure those downturns without altering their strategy.
However, in the context of a diversified portfolio, a leveraged equity fund can provide extremely good returns. These funds can be combined with un-leveraged funds to achieve desired leverage ratios, based on each investor's risk tolerances and investment timelines.
These funds are extremely risky, and should likely make up a relatively small part of a diversified portfolio. I will invest in leveraged funds after further research into portfolio allocations, but they are wildly inappropriate for investors with lower risk tolerance and shorter investment horizons.