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A comment on S&P Dow Jones Indices to launch cryptocurrency indexes in 2021. Parent comment

Re:S&P Dow Jones Indices to launch cryptocurrency indexes in... by pashamur on Thursday December 03, 2020 @01:40PM (#25292711)
That's also ignoring the cost of capital, as leveraging risk adjusted returns has to take that into account. You don't get the same rate of return if you use margin, say, in order to leverage.

If you use a 3x or other leveraged fund, then you run into tracking issues (look at https://www.etf.com/etfanalytics/etf-comparison/SPXL-vs-SPY) where you see tracking break down), you can lose everything (remember XIV?), and you have other potential issues.

So it's not as simple as leveraging up a low-risk portfolio to assume a given risk/return ratio. There's also diversification to keep in mind.

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Re:S&P Dow Jones Indices to launch cryptocurrency indexes in... by fractionalhare on Thursday December 03, 2020 @04:21PM (#25295173)
That is a good point, but that all applies to riskier investments as well. Whether or not that specific example will beat out something like cryptocurrencies does depend on margin and transaction costs, this is true.
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