Question 1

What can you calculate with the Compound Calculator?

Accepted Answer

Enter your initial investment, expected annual return, investment period, and annual volatility to compare the final value and effective return of 1x, 2x, and 3x leveraged ETFs. The calculator accounts for volatility decay and hidden costs including borrowing costs and rebalancing costs.

Question 2

Why is leveraged ETF compounding different from standard compounding?

Accepted Answer

Leveraged ETFs rebalance daily to maintain their target multiple. As the market fluctuates up and down, this process causes volatility decay, resulting in returns lower than the theoretical multiple. Mathematically, the expected annual return is approximately L×μ − 0.5×L×(L−1)×σ².

Question 3

How does volatility affect leveraged ETF returns?

Accepted Answer

Higher volatility leads to greater leveraged losses. For example, at 20% annual volatility, a 3x leveraged ETF may underperform its theoretical value by more than 6 percentage points per year. At 40% volatility, this drag can increase to 24 percentage points.

Question 4

What are the hidden costs of leveraged ETFs?

Accepted Answer

Beyond the stated expense ratio, there are borrowing costs (benchmark rate + spread × leverage ratio), daily rebalancing slippage, and for futures-based ETFs, rollover costs. A 2x ETF may incur total annual costs of 5–6%, while a 3x ETF may incur 10–12%.

항목	1x	2x	3x
운용보수	0.20%	0.64%	0.82%
차입비용	0%	4.80%	9.60%
리밸런싱 비용	0%	0.30%	0.45%
변동성 감쇠 (연 환산)	0%	-4.00%	-12.00%
실질 연간 총비용	0.20%	9.74%	22.87%

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