This brief paper provides an actual market example of daily investment results for leveraged ETFs.
The return of a benchmark index for a given period tells you little about what that Direxion Shares ETF will return for that same period. The path a benchmark takes to obtain that return can be of much greater consequence.
Summary – The return of a leveraged ETF for a period longer than a day is the product of the series of leveraged daily returns for the fund within the period. It is not the return of the benchmark multiplied by the fund’s target leverage point (3 in the case of Direxion Shares). The funds’ returns can be positively impacted by a smoothly trending index, or negatively by a volatile index for a period longer than one day. Leveraged funds such as Direxion Shares, with relatively high leverage points, should be monitored regularly to ensure that desired exposure levels are maintained. If exposure levels grow beyond or drop below the levels sought by the investor, reallocation should be strongly considered.