Leveraged ETF.
In plain English
A leveraged ETF tries to deliver a multiple of an index's return for a single day, such as twice or three times the daily move, using debt and derivatives. The critical catch is the daily reset: because the target is a daily multiple, returns compound in a way that pulls the fund away from the simple multiple over longer periods, especially in choppy markets. This decay, plus high fees, means a 3x fund held for months can lose money even if the index ends higher. Regulators warn they are built for short-term trading, not buy-and-hold.
01Why it matters
Leveraged ETFs look like an easy way to amplify gains, but the daily reset and decay make them lose value over time in volatile markets, so understanding them prevents a costly mistake.
02The math, step by step
A 3x fund tracks an index that rises 10 percent then falls 10 percent over two days. The index is down about 1 percent, but the leveraged fund, resetting daily, can be down far more, several percent, because of how the multiples compound.
03What this is NOT
A leveraged ETF does NOT deliver its multiple over long periods. It targets a daily multiple, so compounding and decay pull it away from three times the index return the longer you hold it.
04Receipts
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