Reporting of results with potential large slippage impacts

[Nelson Brady]

The higher yielding strategies not surprisingly rely heavily on leveraged funds. And they report great results if you can handle the drawdowns. But you mention they do not consider slippage and the numbers frequently come from backtesting. In the case where the numbers have actually been tracked are the numbers accurate WRT slippage? For example if the US 2X leveraged strategy was tracked over a year and alternated up 10% one month and down 10% the next, repeating through the year, would the results show that as a loss due to slippage or would it say the gain/loss was zero? In any period of time with high volatility are the results going to skew high?

[Frank1 Grossmann]

In a sideways up and down market these leveraged ETFs will show some rebalancing losses. However, in upgoing or down going markets the leverage is an advantage. So, for example, when Gold is 20% up within a month like in July, then the leveraged ETFs will profit more than a position made of 2x or 3x the amount of unleveraged ETFs. Same for big monthly drops. Here in fact your losses are limited on the value of the ETF. I would say that most of the time using leverage is an advantage.

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