The Truth About Leveraged ETFs | Rational Reminder 430

Meet with PWL Capital — https://pwlcapital.com/ PWL Team — https://pwlcapital.com/our-team/ Avoid Online Scams — https://pwlcapital.com/stay-safe-online/ Ben Felix or any PWL employee will never reach out to you on social media platforms or WhatsApp to give financial advice. These are scammers trying to commit fraud. In this episode, Ben Felix, Dan Bortolotti, and Kelly Thomas revisit some of the blind spots from their recent discussion about the finances of marriage before diving into a deeply nerdy discussion about leveraged ETFs. Kelly brings a different perspective to questions around spending roles, career sacrifices, financial autonomy, and the mental load of managing household finances. The main discussion explores leverage, human capital, volatility drag, and the long-held belief that daily resets make leveraged ETFs poor long-term investments. Ben explains how his own thinking changed after feedback from the Rational Reminder community and a growing body of research, arguing that daily resets themselves do not cause volatility drag—volatility does. The conversation examines when leverage might make theoretical sense, why the safety of human capital is a critical assumption, and why what looks optimal in a model may be difficult to stick with in real life. They also examine the practical risks and costs of leveraged ETFs, including financing costs, swap counterparty risk, extreme drawdowns, and the very different experience of leveraged index ETFs versus single-stock leveraged ETFs. The episode ultimately comes back to a broader financial planning question: if your financial goals can be achieved without leverage, do you actually need the additional risk? WEBINAR | A Conversation With David Booth (November 4, 12:15 PM ET)* — https://pages.pwlcapital.com/webinar-a-conversation-with-david-booth *The first 250 Canadian residents to register will receive a FREE copy of David's book, "Stay Calm" Sources — https://zbib.org/455c998cf1784f5299ff981c8b96f6d2 Timestamps: 0:00:00 Intro 0:01:13 Episode 426 Postmortem Discussion 0:10:25 Main Topic: LETFs (Background) 0:15:12 LETFs 0:20:53 The Case for Leverage 0:32:03 Diversification Across Time 0:37:27 Beyond the Status Quo 0:39:06 Summary 0:43:08 Potential to Underperform 0:46:35 Daily Resets 0:56:59 Empirical Evidence 1:03:49 LETFs and Asset Allocation 1:05:01…