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Why are daily rebalanced inverse/leveraged ETFs bad for long term investing?
In addition to the excellent answers here I might suggest a reason for investing in leveraged funds and the original purpose for their existence.  Lets say you run a mutual fund that is supposed to track the performance of the S&P 500.   If you have cash inflows and outflows from your fund due to people investing and selling shares of your fund you may have periods where not all funds are invested appropriately because some of the funds are in cash.  Lets say 98% of your funds are invested in the securities that reflect the stocks in the S&P 500.  You will will miss matching the S&P 500 because you have 2% not invested in some money market account.   If you take 1/3 of the cash balance and invest in a triple leveraged fund or take 1/2 of the funds and invest in a double leveraged fund you will more accurately track the index to which your fund is supposed to track.  I am not sure what percentage mutual fund owners keep in cash but this is one use that I know these ETFs are used for. The difference over time that compounding effects have on leveraged funds is called Beta Slippage. There are many fine articles explaining it at you can find one located at this link.