Disclaimer: The information in this article is intended for informational purposes only and should not be taken as personal financial advice.
SPXL Backtest: Key Takeaways
- A $1,000 investment into SPXL in 1999 would be worth $4,948 today.
- With a $100 monthly dollar cost average, you would have $470,311 today.
- With a $500 monthly dollar cost average, you would have $2,331,762 today.
Investing in SPXL Before the Dot-Com Bubble
Leveraged ETFs such as SPXL (3x leveraged S&P 500) offer high reward potential at the price of increased risk.
Since its inception in November 2008, it has delivered an incredible 4,800% return! Here is a snapshot of the all-time SPXL chart showcasing its growth over the last 17 years.
The prolonged bull markets over the last few decades have contributed significantly to the incredible returns of SPXL. However, anyone remotely familiar with leveraged ETFs will know that recessions cause volatility decay and massive drops in value.
SPXL was introduced at the tail end of the 2008 Financial Crisis. It has not been around long enough to experience the impact of major downturns like the 2000s Dot-Com Bubble or the bulk of the 2008 crash, so there is no chart to analyze. Because of this, I have always been curious about how SPXL would have performed during these recessionary periods in the market.
Using historical data from SPY, I created a simulation for how SPXL would have performed if it had been available before the Dot-Com bubble in 1999. Additionally, I examined scenarios involving consistent dollar cost averaging (DCA) during that time.
The results may surprise you!
Methods for Backtesting SPXL Before the Dot-Com Bubble
To estimate SPXL’s performance prior to its official launch, the following methodology and assumptions were applied:
- Data Source: SPY’s daily historical data was exported from Thinkorswim.
- Calculation Method: Assumed that SPXL’s daily return rate is exactly 3x that of SPY.
- Expense Ratio (ETF Fees): SPXL’s current expense ratio (0.88%) was subtracted annually from the simulated value.
Please note that this simulation serves as a general representation and is not 100% accurate. As such, the results should be viewed as illustrative rather than definitive.
For those interested in the detailed plot and full data sheet, click here. Feedback on improving the data is always welcome through my contact page.
SPXL Backtest: How It Would Have Performed Before the Dot-Com Bubble
SPXL’s performance since its introduction in 2008 has been stellar, to say the least. However, let’s examine how a $1,000 investment into SPXL before the early 2000’s Dot-Com bubble would have fared over time:
Scenario 1: No Additional Money Added
Total Invested: $1,000 | Current Balance: $4,948 | Percent Gain: +395%
If you invested $1,000 in SPXL in 1999 and never added another penny, your investment would be worth $4,948 today. While you would still be up overall, the journey was anything but smooth.
During the 2008 financial crisis, your investment would have plummeted by 97%, dropping to just $31. Yes, you read that right—only $31 remained from your original investment (though not nearly as bad as other leveraged ETFs such as TQQQ).
But here’s the incredible part: from that rock-bottom low, your money would have grown back to $4,948, a nearly 16,000% return over 17 years.
Scenario 2: $100 Monthly Contributions
Total Invested: $31,100 | Current Balance: $470,311 | Percent Gain: +1,414%
By consistently contributing just $100 per month, your initial investment would have grown to $470,311 today! This shows the remarkable power of dollar cost averaging when paired with a high-growth, high-volatility investment like SPXL.
Scenario 3: $500 Monthly Contributions
Total Invested: $156,500 | Current Balance: $2,331,762 | Percent Gain: +1,391%
With $500 monthly contributions, your portfolio would have reached an incredible $2,331,762.
There are two main lessons from this analysis:
- SXPL is extremely volatile: It experiences massive drops during recessions but rebounds dramatically during bull markets. The 2000 Dot-Com Bubble and the 2008 Financial Crisis are prime examples of this volatility.
- Dollar cost averaging wins: Consistently investing over time proved to be the best strategy. By purchasing shares at lower prices during downturns, investors positioned themselves for exponential gains during bull market recoveries.
SPXL vs. SPY Before the Dot-Com Bubble: Which ETF Delivered Better Returns
Investors often compare SPY (S&P 500) with SPXL, its leveraged counterpart that offers three times the daily return of the same index.
Let’s break down the performance of both funds using the same investment scenarios and timeframe of 1999-2025:
| Initial Investment (1999) | 1. No Additional Money (2025) | 2. $100 Monthly Contribution (2025) | 3. $500 Monthly Contribution (2025) | |
|---|---|---|---|---|
| SPY | $1,000 | $4,706 | $127,610 | $619,226 |
| SPXL | $1,000 | $4,948 | $470,311 | $2,331,762 |
While SPXL has outperformed SPY in terms of total returns, its extreme volatility must be considered.
If no additional money was added beyond the initial $1,000, SPXL barely outperformed SPY. This is because the massive gains of SPXL during bull markets were counteracted by sharp declines and the effects of volatility decay from the Dot-Com Bubble and the 2008 Financial Crisis.
The real power of SPXL comes from dollar cost averaging. Regular contributions helped smooth out market fluctuations and allowed investors to capitalize on its explosive growth during market upswings.
It is also worth noting that while SPXL has shown strong performance, TQQQ (3x leveraged NASDAQ) has demonstrated significantly higher returns when dollar cost averaging. However, TQQQ also carries higher volatility, making it even more difficult to hold through downturns.
Is SPXL a Good Investment for Long-Term Growth?
On paper, it’s so simple! Just throw a couple hundred dollars at SPXL every month for the next few decades and you’ll end up a millionaire, right?
Not necessarily. The harsh reality is that many investors struggle with emotional decisions during market crashes. Dollar cost averaging when your initial investment is down 97% is far more challenging than it appears on paper.
Additionally, past performance in the stock market does not guarantee future results. While the U.S. stock market has historically recovered from recessions in the past, there is no guarantee that stocks will go up forever.
Despite the risks…
I believe SPXL can be a good long-term investment for a portion of your portfolio. Its underlying asset, SPY, is a well-diversified ETF with a proven history of consistent growth. I personally keep a small amount of SPXL in my investment portfolio.
Conclusion: What the Dot-Com Bubble Taught Us About SPXL Investing
If you had invested in SPXL before the Dot-Com Bubble, the journey would have been anything but smooth. A one-time investment saw major swings and ended with a return similar to SPY. In contrast, dollar cost averaging led to much higher gains over time.
SPXL has the potential to be a great high-risk, high-reward opportunity, but its risks and extreme volatility require careful consideration. Investors with the patience and discipline to follow through with a set investment plan are the most likely to succeed.
Happy investing!
