r/letfs
2x NASDAQ-100 During Dot-Com, a Mutual Fund Example
The author uses the historical Rydex 2x NASDAQ-100 fund to argue that modern LETFs with lower fees and better indexes are a sensible portfolio addition.
- Modern LETFs have much lower expense ratios compared to historical 2x funds like RYVYX.
- Today's LETFs track more diversified and less volatile indexes than the NASDAQ.
- Historical data shows that even a suboptimal 2x fund survived the Dot-Com crash, making leverage a sensible strategy today.
I see people wondering how a 2x NDQ100 fund would have performed during the Dot-Com crash, but there is actually a mutual fund which suffered the full impact of the crash - Rydex NASDAQ-100® 2x Strategy Fund Class H (RYVYX).
Granted, the fund does have an absolutely astronomical net expense ratio of 1.74% today, but I just found it interesting that such a fund existed during that time.
Considering we have access to 2x funds with a much lower expense ratio today, with more diversified and less volatile indexes being tracked compared to the NASDAQ (2x MSCI World), I think it's pretty clear that introducing some leverage to one's portfolio through LETFs is quite a sensible thing to do when we consider how a suboptimal 2x fund faired in one of the biggest crashes in history. I know I'm preaching to the choir here, but I thought it'd be interesting for people who weren't aware of the fund's existence.
Thank you for brining this fund to our Attn.
so they solved it in the 1990s?
SOLVED for 30 YEARS!! It’s done. All in 2x!!
Many people do not realize that there was a huge runup in hardware and software spending in anticipation of year 2000, aka Y2K. That spending all disappeared after the milestone passed. It was not just the .com stuff.
yeah
UOPIX is a 2x Nasdaq-100 fund
Also
ULPIX is a 2x SP500 fund
Both survived the dot com crash, 09, covid etc
And beat the underlying index
Comparing performance since dotcom isn’t that correct. Nasdaq 100 did 800% return from 1995-2000, so to then start from 2000 and say your position is wiped out doesn’t says everything. Don’t think we see that drop again, but a -50% correction in our lifetime can still happen
Very true! The run-up to the dotcom peak was truly insane, and I feel like this part isn’t talked about enough. The maximum drawdown was over 80%, which is the same as giving back around 500% of gains. Horrible, no doubt. But 500% is just what the Nasdaq-100 had gained since April ‘97, which is a little less than three years before the bubble’s peak.