We want to spread the word about some widely-held misconceptions and underappreciated risks for leveraged ETFs (Exchange-Traded Funds). Leveraged ETFs, which are designed to offer leverage or perform inversely to the index or benchmark they track, are some of the most popular securities trading daily in our Trading Activity page.
These ETFs can be handy in some sophisticated trading strategies, but a strong word of caution is in order, too: they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis. Due to the effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective. That means inverse and leveraged ETFs that are reset daily typically are unsuitable for any investors who plan to hold them for longer than one trading session, particularly in volatile markets.
I encourage you all to read more about these ETFs on our site at http://content.tradeking.com/wiki/x/Xkc.
If you have any questions about leveraged ETFs, by all means contact us at TradeKing and ask away. The last thing we want is for our clients to trade these products without a full appreciation for the risks and a healthy understanding of how the products are intended to work. No question is too stupid; the only stupid move is not to ask if you’re unsure. Speak up and inform yourself!
[image: caution ice by s_jelan on flickr]
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