Free tool · Accumulator math

A big drawdown, and still ahead of a steady 10%

Two forces worth understanding before you touch a leveraged strategy. Move the drawdown early to see why an accumulator who keeps contributing actually wants volatility early; move it late to see whether a compounding edge survives the hit. The dashed amber line shows what taxes cost an actively-rotating taxable account versus holding forever, which is the whole reason a never-sell barbell belongs in a taxable account and the pure rotation belongs in a Roth.

Not tax, legal, or investment advice. These are hypothetical figures you set yourself; they are not a proven or guaranteed return. Leveraged ETFs carry substantial risk of loss, including drawdowns far deeper than the ones modeled here.

Assumptions

Starting balance$0

Monthly contribution$500/mo

Horizon25 yrs

Growth strategy CAGR18.0%

One-time drawdown-60%

Drawdown happens in yearyr 15

Steady baseline CAGR10.0%

Taxable rotation tax rate25%

Show taxable active-rotation drag

Balance over time

Hold forever (Roth or taxable, deferred)Taxable, active rotationSteady baseline

Hold forever ends at

$980k

6.5x contributed

Steady baseline ends at

$617k

4.1x contributed

Total contributed

$150k

you never withdraw

After the drawdown

1.59x the steady 10%

hold-forever still ahead

Hold forever ends at $980k versus $617k for the steady 10%, on $150k contributed. Even with the 60% drawdown in year 15, it stays 1.59x ahead, pulling clear for good around year 19. Rotating this in a taxable account instead of holding forever costs $465k in compounded taxes (47% of the final balance), the Fortress-barbell advantage.

How to read this, and what it can not tell you

Early drawdown, still contributing: drag the drawdown to year 2 versus year 20 with everything else fixed. Terminal wealth is higher when the crash lands early, because your ongoing contributions buy in cheap and catch the recovery. That is the accumulator's edge, and it is real.
Late drawdown, still ahead: a compounding edge survives a big late hit once enough time has passed. The crossover is N > ln(1 - dd) / ln((1 + baseline) / (1 + growth)). With 18% versus 10% and a 60% hit, that is roughly year 12.
The Fortress-barbell / taxable point: the amber line is the same strategy rotated in a taxable account, paying tax on gains each year. Holding forever defers that tax, so it compounds on money the rotator hands to the IRS. This is exactly why the never-sell barbell is the tax-smart way to hold leverage in a taxable account, and why the pure rotation belongs in a Roth.
The trap: all of this lives inside one unknown, the real, realized, after-cost growth CAGR. You can not assume 18% and a surprise 60% drawdown; if those drawdowns happen, they are already part of why the realized CAGR is whatever it is. A leveraged ETF can draw down 80%+, not 60%, and may not recover on your timeline. And half of this only works if you actually keep buying while down, which almost nobody does.

Model: monthly compounding, contributions added monthly, one drawdown applied at the chosen year to both growth lines (not the baseline). Taxable rotation is approximated as paying the tax rate on each year's gain, a high-turnover proxy; a loss year pays none.