Vanguard is now banning some of the most innovative new ETFs in much the same way that Wall Street first rejected Vanguard back in “Bogle’s Folly!”
The firm refuses to see value in the leading leveraged ETFs, just as Vanguard initially resisted traditional ETFs as well.
What does it take?
ProShares and Direxion are the leveraged ETF pioneers, and their 3x ETFs for the Nasdaq 100 (TQQQ) and semiconductors (SOXL) delivered 10x to 20x the return of the S&P 500 over a recent six-year period.
Still, Vanguard does not see opportunity in these extraordinary investment tools?
In early 2016, ETF PM upgraded the investable benchmarks to engage leveraged ETFs because our research concluded that leveraged income and growth portfolios have been far more effective than unleveraged growth solutions.
Leveraged Income & Growth
Over the past 5.1 years, the leveraged investable benchmarks returned 13% to 26% annualized, or 87% to 227% in total return. This return range significantly outperformed the S&P 500 return of 10% annualized, or 62% in total return.
Leveraged income and growth, or risk parity, is now being engaged by many leading asset managers, hedge funds, and index providers.
Vanguard was ridiculed by industry leaders for launching the first index fund, and they now ridicule some of the best investment solutions today.
People are often encouraged to use leverage to buy a home or car, but not their retirement portfolio. However, the investable benchmark returns indicate that just as diversification can be a free lunch, leveraged diversification can be a free retirement nest egg.
Note, past performance can never guarantee future results, and leveraged ETFs often do not deliver the exact multiple of the index return they target. Investors should be careful to engage leverage slowly and cautiously, with the addition of proven risk controls whenever possible.
Contact us today to learn more.