No.

Leveraged funds that rebalance daily must not be held long term. You can, and will, lose money even if you are right about the direction of the market.

Please, take this warning seriously. It is made for sound mathematical reasons.

The short version is that changes in the underlying index cause the position to gain or lose leverage in unpredictable ways that require active management to keep the position working. This is because leverage is only meaningful with respect to a specific time frame.

If you’re thinking “a 3X leverage fund is like tracking the underlying, just 3 times as much”, you will quickly find that it is impossible to make this math work. Let’s try it.

The underlying goes up 1%, I think the leveraged fund should go up 3%.

The underlying goes down 1%, I think the leveraged fund should go down 3%.

The underlying goes down 0.01%, I think the leveraged fund should go down 0.03%.

Unfortunately, this is mathematically impossible unless all these events take place in the same time frame.

Why? Because say the underlying goes up 1% and then down 1%. The math says this leaves the underlying down 0.01%. But when the underyling went up 1%, we expect the leveraged fund to go up 3% and when the underlying went down 1%, we expect the leveraged fund to go down 3%. How can you go up 3% and then down 3% and wind up down the 0.03% we expect? Going up 3% then down 3% leaves you down 0.09%.

You see the problem? It is mathematically impossible to create a long-term leveraged fund that everyone can enter at any time they want and get leverage over the underlying.

So here, you could have two people who bought the fund at different times and maintaining 3X leverage requires the fund to do different things for those two different people. It can either give the person who bought before the 1% increase 3X leverage or the person who bought after the 1% increase 3X leverage, but not both!

A fund that gives 3X leverage to daily holders cannot possibly also give 3X leverage to long-term holders. This is a mathematical impossibility.

If you hold such a fund long-term, you are not betting on the direction the underlying will go. I cannot stress this enough — the fund does not do what you think it does. Your reason for buying it is entirely invalid.

Let’s try a more detailed 3X leverage example. I’ll assume a position where you bet the underlying will go up to keep the math simple, but it works the same way in a bearish instrument.

Say you bet right. The underlying goes up 0.58% — but it does this by first going down 6% and then going up 7%.

Unleveraged $100 -> $100 * .94 * 1.07 -> $100.58 - up 58 cents

So an unleverage position is up 0.58% — as expected.

But a leveraged position goes down 3X that and then up 3X that, so down by 18% and then up by 21%.

Leveraged $100 -> $100 * .82 * 1.21 -> $99.22 - down 78 cents

So here, a person who held a 1X bull ETF would make money because they got it right — the underlying is up. But a person who held a 3X bull ETF would lose money. Their unmaintained position lost leverage and they didn’t rebalance to restore the leverage. Oops.

So if you’re thinking, “a leveraged fund usually does what an unleveraged fund does, only more so”, you are wrong with respect to positions that are not actively maintained. They give you the tools to do that, but only if you rebalance properly.

Here’s what actively managing the position could look like:

We have $100 in a 3X leverage fund.

The underlying goes down 6% so we go down 18%. We now have $82 invested.

We rebalance by adding $18 to our position to restore our leverage at the $100 we wanted. (This is really a bit too much.)

Now the underlying goes up 7% so we go up 21%. Our position is now at $121.

We put in $100 and then $18 and are at $121, so we are up $3. We now actually have too much leverage and have to pull some money out at our next rebalance or a drop may cause us to lose more than we should.

Do you see how active management is needed to maintain the appropriate leverage in a leveraged position?

You can use this fund to obtain a long-term leverage position. It is the right tool for the job. But you would have to understand how to rebalance your position properly every day or you will increasingly diverge from the performance you expect in random and unpredictable ways.

As the warnings state, you must understand how leverage and rebalancing works to hold those kinds of positions over multiple days, adjusting them as needed to have the desired amount of leverage. Not doing so is betting on the precise path the index takes to go up or down, not its direction.