1x and 2x Leveraged Real Estate

1x and 2x leveraged real estate mutual funds and ETFs seek to... 1x and 2x leveraged real estate mutual funds and ETFs seek to achieve a multiple of the short-term returns of a real estate equity index. And while they’re called 1x funds, that just means they use less than 2x leverage. For example, a 1.2x leveraged long U.S. real estate mutual fund or ETF will aim to return 1.2x the daily return of a specified U.S. real estate equity index. Meanwhile, a 2x leveraged long U.S. real estate mutual fund or ETF will aim to return 2x the daily return of a specified U.S. real estate equity index. It’s important to note that given how often these funds are rebalanced, the effects of compounding mean that they will only achieve their targeted return on a day-to-day basis. For instance, a fund that seeks twice the daily return of U.S. real estate equities will almost certainly not achieve twice the monthly return of these securities. Over time, these funds typically decay given the rebalancing process. However, a partially leveraged fund, such as 1.2x or 1.5x ETF, will not decay as fast as a 2x or 3x fund. These funds should only be held by experienced traders on a very short-term basis. They are not appropriate for long-term, conservative-minded investors, who should instead look to acquire unleveraged exposure (e.g. through an ETF or mutual fund focused on buying real estate equity securities). Last Updated: 04/19/2024 View more View less

1x and 2x leveraged real estate mutual funds and ETFs seek to achieve a multiple of the short-term returns of a real estate equity index. And while they’re called 1x funds, that just... 1x and 2x leveraged real estate mutual funds and ETFs seek to achieve a multiple of the short-term returns of a real estate equity index. And while they’re called 1x funds, that just means they use less than 2x leverage. For example, a 1.2x leveraged long U.S. real estate mutual fund or ETF will aim to return 1.2x the daily return of a specified U.S. real estate equity index. Meanwhile, a 2x leveraged long U.S. real estate mutual fund or ETF will aim to return 2x the daily return of a specified U.S. real estate equity index. It’s important to note that given how often these funds are rebalanced, the effects of compounding mean that they will only achieve their targeted return on a day-to-day basis. For instance, a fund that seeks twice the daily return of U.S. real estate equities will almost certainly not achieve twice the monthly return of these securities. Over time, these funds typically decay given the rebalancing process. However, a partially leveraged fund, such as 1.2x or 1.5x ETF, will not decay as fast as a 2x or 3x fund. These funds should only be held by experienced traders on a very short-term basis. They are not appropriate for long-term, conservative-minded investors, who should instead look to acquire unleveraged exposure (e.g. through an ETF or mutual fund focused on buying real estate equity securities). Last Updated: 04/19/2024 View more View less