Disclaimer: The information in this article is intended for informational purposes only and should not be taken as personal financial advice.
SPUU Backtest: Key Takeaways
- A $1,000 investment into SPUU in 1999 would be worth $5,881 today.
- With a $100 monthly dollar cost average, you would have $239,691 today.
- With a $500 monthly dollar cost average, you would have $1,174,929 today.
Investing in SPUU Before the Dot-Com Bubble
Investing in SPUU (2x leveraged SPY) can be both rewarding and challenging. Since its inception in 2014, it has delivered a decent 400% return. Here is a snapshot of the all-time performance of SPUU.
The resilience of the US stock market over the past few decades has played a major role in SPUU’s strong performance. However, leveraged ETFs are particularly vulnerable to market downturns, experiencing steep declines in value and volatility decay.
SPUU is a fairly new leveraged ETF, being introduced in 2014. It has not been around long enough to experience the full 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 SPUU would have performed during these recessionary periods in the market.
Using historical data from SPY, I created a simulation for how SPUU 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 SPUU Before the Dot-Com Bubble
To estimate SPUU’s performance before its inception in 2014, I used the following methodology and assumptions:
- Data Source: SPY’s daily historical data was exported from Thinkorswim.
- Calculation Method: Assumed that SPUU’s daily return rate is exactly 2x that of SPY.
- Expense Ratio (ETF Fees): SPUU’s current expense ratio (0.61%) 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.
SPUU Backtest: How It Would Have Performed Before the Dot-Com Bubble
SPUU’s has demonstrated strong historical performance since its introduction in 2014. However, let’s examine how a $1,000 investment into SPUU 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: $5,881 | Percent Gain: +388%
If you had invested $1,000 in SPUU in 1999 and never added another penny, your investment would now be worth $5,881. However, the journey would not have been smooth.
During the 2008 financial crisis, your investment in SPUU would have plummeted by 84%, dropping to just $161. While not as devastating as the 97% crashes seen in some 3x leveraged ETFs like SPXL or TQQQ, this kind of drawdown still tested the resolve of even the most patient investors.
But here’s the incredible part: from that rock-bottom low, your money would have grown back to $5,881, a nearly 3,600% return over 17 years.
Scenario 2: $100 Monthly Contributions
Total Invested: $31,100 | Current Balance: $239,691 | Percent Gain: +670%
By consistently contributing just $100 per month, your initial investment would have grown to $239,691 today! This demonstrates the power of dollar cost averaging in leveraging long-term growth.
Scenario 3: $500 Monthly Contributions
Total Invested: $156,500 | Current Balance: $1,174,929 | Percent Gain: +651%
With $500 monthly contributions, your portfolio would have reached an incredible $1,174,929.
There are two main lessons from this analysis:
- SPUU is 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.
SPUU vs. SPY Before the Dot-Com Bubble: Which ETF Delivered Better Returns
Many investors weigh the benefits of SPY (S&P 500 ETF) against SPUU, its leveraged counterpart that aims to deliver twice the daily returns of the 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 |
| SPUU | $1,000 | $5,881 | $239,691 | $1,174,929 |
Because SPUU employs 2x leverage, it amplifies both gains and losses. While it outperformed SPY in most scenarios, it also carried higher risks.
If no additional money was added beyond the initial $1,000, SPUU only outperformed SPY by about 20%. This is because the massive gains of SPUU 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 key advantage of SPUU lies in consistent periodic investments. Dollar cost averaging not only helped smooth out volatility, but it also let investors take advantage of the fund’s exponential growth during bull markets.
It is also worth noting that while SPUU has shown strong performance, SPXL (3x leveraged S&P 500) has demonstrated significantly higher returns when dollar cost averaging. However, increasing your leverage also carries higher volatility, making it even more difficult to hold through downturns.
Is SPUU a Good Investment for Long-Term Growth?
At first glance, the strategy seems simple—invest a few hundred dollars into SPUU every month for decades, and you could achieve impressive wealth.
However, reality is always more complex. Many investors struggle with the psychological toll of steep market downturns. Holding onto a leveraged fund when your investment is down 80% or more requires incredible discipline.
Additionally, past performance is not a guarantee of future results. While the U.S. stock market has historically rebounded from recessions, there are no assurances that this trend will continue indefinitely.
Despite the risks…
I believe SPUU 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.
Conclusion: What the Dot-Com Bubble Taught Us About SPUU Investing
If you had invested in SPUU before the Dot-Com Bubble, your investment journey would have been filled with volatility. A lump-sum investment would have faced steep declines but still yielded solid long-term returns. On the other hand, dollar cost averaging would have turned consistent investments into substantial wealth.
SPUU presents an exciting high-risk, high-reward opportunity. However, it requires investors to maintain discipline and a high tolerance for market swings. Those who stick to a structured investment plan are the ones most likely to succeed.
Happy investing!
