I retrieved historical data for Micron (MU) and the 2x leveraged ETF (MUU) via the moomoo API and compared returns from holding since arbitrary dates approximately one month ago and three months ago to examine how significant the often-discussed decay effect really is.
As a result, during this verification period, MUU outperformed MU on most starting dates.
Particularly over the past month, Micron’s stock price formed a relatively smooth upward trend, suggesting that the compounding benefit during the rising market outweighed the volatility drag (decay) typically associated with leveraged ETFs.
If purchased approximately one month ago ・MU: 1.53x
・MUU: 2.03x
On the other hand, for purchases made three months ago, the verification period included an initial decline phase.
Generally speaking, leveraged ETFs tend to underperform when markets experience significant round-trip moves (decline followed by recovery). However, in this case, the subsequent rally was so strong that it more than offset the initial decay effect.
If purchased approximately three months ago ・MU: 2.58x
・MUU: 5.16x
What this analysis reveals is that it’s not always true that 'leveraged ETFs inevitably underperform due to decay.'
• A strong upward trend,
• A sufficiently long rising period,
• Not excessively high volatility,
Under these conditions, the compounding effect can outweigh decay, resulting in returns significantly exceeding those of the underlying asset.
Conversely, in ranging or highly volatile markets, the outcome could reverse.
For your investment reference.
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