3x Leveraged Equity

3X leveraged equity mutual funds and ETFs are designed to offer three... 3X leveraged equity mutual funds and ETFs are designed to offer three times the daily return of a particular stock or equity index. For example, if the S&P 500 Index rises 1% on a given day, a 3% bull ETF linked to the index should rise 3%. On the other hand, if the index falls 1%, this same fund should decline by 3%. To achieve their objectives, 3X leveraged equity mutual funds and ETFs enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, 3X leveraged funds may not produce the same result if held for weeks, months or longer. In fact, it’s very likely that one of these funds may fall in value considerably over a longer period, even if the underlying market rises. In addition, it’s crucial to know that if a stock or index falls by 33% or more in a given day, the entire value of a 3X fund will probably be wiped out. 3X leveraged equity mutual funds and ETFs are attractive for short-term traders with a very large appetite for risk. Conservative investors are better off owning an unleveraged stock or mutual fund if they want exposure to a particular equity, sector, or stock index. Last Updated: 04/25/2024 View more View less

3X leveraged equity mutual funds and ETFs are designed to offer three times the daily return of a particular stock or equity index. For example, if the S&P 500 Index rises 1% on... 3X leveraged equity mutual funds and ETFs are designed to offer three times the daily return of a particular stock or equity index. For example, if the S&P 500 Index rises 1% on a given day, a 3% bull ETF linked to the index should rise 3%. On the other hand, if the index falls 1%, this same fund should decline by 3%. To achieve their objectives, 3X leveraged equity mutual funds and ETFs enter into derivative contracts with banks and other financial institutions. It's important to note that these funds are only meant for very-short term trading. Because they are rebalanced daily depending on market fluctuations, 3X leveraged funds may not produce the same result if held for weeks, months or longer. In fact, it’s very likely that one of these funds may fall in value considerably over a longer period, even if the underlying market rises. In addition, it’s crucial to know that if a stock or index falls by 33% or more in a given day, the entire value of a 3X fund will probably be wiped out. 3X leveraged equity mutual funds and ETFs are attractive for short-term traders with a very large appetite for risk. Conservative investors are better off owning an unleveraged stock or mutual fund if they want exposure to a particular equity, sector, or stock index. Last Updated: 04/25/2024 View more View less