3x Leveraged Bond

3x bond mutual funds and ETFs seek to achieve triple the daily... 3x bond mutual funds and ETFs seek to achieve triple the daily returns of a fixed-income index. For example, a 3x leveraged long U.S. Treasury mutual fund or ETF will aim to return 3 times the daily return of U.S. Treasury bonds of a specified duration. So, if the underlying benchmark rises 1%, a 3x mutual or ETF should return 3 times that amount. 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 3 times the daily return of 10-year U.S. Treasury bond index will almost certainly not achieve triple the monthly return of index. Over time, these types of mutual funds and ETFs decay given the rebalancing process. 3x bond mutual funds and ETFs carry higher risk than 1x and 2x bond funds due to higher leverage. As such, they are not appropriate for long-term, conservative-minded investors, who should instead look to invest in unleveraged fixed income ETF or mutual fund, which simply holds traditional debt securities. Last Updated: 04/26/2024 View more View less

3x bond mutual funds and ETFs seek to achieve triple the daily returns of a fixed-income index. For example, a 3x leveraged long U.S. Treasury mutual fund or ETF will aim to return... 3x bond mutual funds and ETFs seek to achieve triple the daily returns of a fixed-income index. For example, a 3x leveraged long U.S. Treasury mutual fund or ETF will aim to return 3 times the daily return of U.S. Treasury bonds of a specified duration. So, if the underlying benchmark rises 1%, a 3x mutual or ETF should return 3 times that amount. 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 3 times the daily return of 10-year U.S. Treasury bond index will almost certainly not achieve triple the monthly return of index. Over time, these types of mutual funds and ETFs decay given the rebalancing process. 3x bond mutual funds and ETFs carry higher risk than 1x and 2x bond funds due to higher leverage. As such, they are not appropriate for long-term, conservative-minded investors, who should instead look to invest in unleveraged fixed income ETF or mutual fund, which simply holds traditional debt securities. Last Updated: 04/26/2024 View more View less