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Exchange-Traded Fund (ETF)
An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.
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Benefits of Leveraged ETFs | Risks of Leveraged ETFs |
|---|---|
Leveraged ETFs amplify daily returns and can help traders generate outsized returns and hedge against potential losses. | A leveraged ETF's amplified daily returns can trigger steep losses in short periods of time, and a leveraged ETF can lose most or all of its value. |
Shares of leveraged ETFs are traded in the open market like a stock. | Some leveraged ETFs are not heavily traded, meaning that your ability to buy or sell shares in a leveraged fund may be constrained. |
Investing in a leveraged ETF can confer indirect exposure to derivatives contracts. | Because they utilize derivatives to boost returns, leveraged ETFs are less likely to closely track the underlying index or asset. |
Leveraged ETFs mirror the daily returns of an index or asset with minimal tracking errors. | Leveraged ETFs over the long term do not closely mirror the daily returns of the index or asset they track. |
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About the Author
Nicholas’ investing experience began when he opened up a retirement account shortly after finishing high school. His work experience in financial services began in 2007 in an internship position with a national brokerage firm in Arizona. While his career path led him into civil engineering and related fields, he stayed personally involved and active in the investment realm. He eventually returned to a career in investments and financial services in 2012, running a branch office for the same national brokerage firm, this time just outside of Spokane, WA. During the Great Recession, he began developing a flexible and global investing approach that could evolve with a tumultuous and ever-changing world. Wanting to offer that approach to investment management to his clients paired with a financial planning and consulting business, he founded Concinnus Financial in 2014.
Nicholas grew up in a small town on the Northern California coast just a few minutes from the Oregon border. Growing up in a rainy, quiet little town, he developed a love of music and can play several instruments. He now lives with his wife Kasey and their two Humane Society-rescued dogs. Together they enjoy the outdoors all four seasons of the year, cooking, and craft beer and wine.
Nicholas Rossolillo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
