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While we know that leveraged ETFs do decline in value to zero given infinity, can we also say the same with our portfolio value if we use leverage in our trading activity and seeing our portfolio value fluctuating in close correlation to the underlying asset price times leverage, with a net decline in value over time, while the underlying asset price remain unchanged by the end of the same time period, even though we commit to just 1 trade (buy-n-hold) within this time period?

Edition: It's okay. I've found the answer. This question is considered resolved but with no relevant answer given I would want to delete the question but don't know how.

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  • $\begingroup$ Welcome to Quant.SE! Please give an answer to your own question then. $\endgroup$ – vonjd Jul 21 '15 at 8:26
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I'd question the assertion in your question, what proof do you have that leveraged ETFs must go to zero? A plausible price pattern can easily be constructed that leads to a leveraged ETF that climbs forever. That same leveraged portfolio would climb forever as well.

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I may not have fully understood your question, but I assume you are asking what will happen on a leverage portfolio over time if the underlying price stays the same.

A leveraged portfolio would likely eventually go to zero (and below) simply because of the cost of leverage. At minimum, you are borrowing at the risk-free rate. An ETF would just go to zero.

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