How risky is my 2x leveraged 65/35 split in NASDAQ 100 and S&P 500? Advice needed!

General
1

Hi everyone,

I’m considering a strategy using 2x leverage and splitting 65% into NASDAQ 100 and 35% into S&P 500 for one year. Here’s what I’ve calculated:

  • Expected return (leveraged): ~26.5%
  • Expected volatility (leveraged): ~50.9%
  • Chance of a positive return: ~69.87% (based on historical data and assuming a normal distribution).

I know leverage amplifies both returns and risks, and I’m aware that things could go south quickly. However, I’m drawn to the potential upside.

How would you rate the risk of this strategy on a scale of 1 (very low) to 10 (extremely high)? Do you think this is a reasonable plan or a bit too risky? Any alternative suggestions are welcome too.

Thanks in advance!

2

I’d rate this a 15 out of 10, not just because of the leverage but because you’re trying to time the market.

What’s the plan if the market tanks and doesn’t recover in your one-year timeframe? Leverage can amplify losses, and leveraged ETFs reset daily, which makes them tricky for longer holds.

For example, if the market drops 30% in six months, you could be down 70%. Even if the market recovers in another six months, you might still be in the red due to volatility decay. Check the charts for SPY vs. UPRO—UPRO took far longer to recover after the 2022 downturn compared to SPY.

If you go ahead, make sure you fully understand how leveraged ETFs work and be prepared for extreme volatility. This strategy is not for the faint of heart.

3

@Ben
UPRO is 3x leveraged. If you want a more accurate comparison for 2x leverage, look at SSO or SPUU.

4

Kei said:
@Ben
UPRO is 3x leveraged. If you want a more accurate comparison for 2x leverage, look at SSO or SPUU.

Good point, but UPRO’s behavior illustrates the risks. The same principles apply even with 2x leverage, just slightly less amplified.

5

Leveraging your portfolio in today’s market feels more like gambling than investing.

6

Maybe DCA into this instead of going all-in at once. I like SSO and QLD for leverage, but the market is acting strangely right now.

7

Lake said:
Maybe DCA into this instead of going all-in at once. I like SSO and QLD for leverage, but the market is acting strangely right now.

What do you mean by ‘acting strangely’?

8

@Uma
It’s been an extended bull run despite overvaluation concerns. The market’s been unpredictable, with sudden drops like yesterday. It could be fear over new policies, global tensions, or even an AI bubble bursting. I’d wait to see how things play out before jumping in.

9

This strategy isn’t for the faint of heart. Have you ever been down 50% on an investment? If so, how did you handle it?

10

Leveraged ETFs have a volatility decay issue. For example, if an index goes up 10% one day and down 10% the next, the net return might be near 0% for the index, but a leveraged ETF would lose money overall. Be cautious.

11

How risky this is depends a lot on how much $100k means to you.

12

I’d rate this an 8/10. There’s a good chance you won’t lose everything, but you need to be prepared to see a 50% drop at some point.

13

If this is all you’ve got, it’s way too risky. If this is ‘fun money,’ then go for it, but understand the risks. I dabble in leveraged funds but only for short-term plays.

14

Solid 9 or 10 on the risk scale.

15

I use leverage myself but would rate this a 7/10. If you dollar-cost average into it, you might mitigate some risks. Try back-testing your strategy against major downturns like the dot-com crash to see how long it would take to recover.

16
  1. How did you calculate the ~70% probability of positive returns?
17

I like the idea but would start small and add more during pullbacks. The NASDAQ usually drops over 2% a couple of times a year, so use those moments to buy in.

18

You might be better off borrowing $100k and investing $200k unleveraged rather than using a leveraged ETF.

19

The problem isn’t the risk—it’s the timeframe. If you need this money in less than a year, stick to bonds or safer options.