3 ms·
Leveraged index funds borrow money from banks and invest it. For example if you invest $100k in a 3x fund, it will borrow an additional $200k (from banks) and i
by xyzzy4 10y ago
Leveraged index funds borrow money from banks and invest it. For example if you invest $100k in a 3x fund, it will borrow an additional $200k (from banks) and invest it. Each day it will be rebalanced to maintain the 3x leverage.
- nitrogen 10y agoWho repays the loan if the index crashes?
- randomdata 10y agoWho repays the loan if the housing market crashes and the tenants walk away?
- user5994461 10y agoFrom what I recall of the "leveraged" financial products I've seen. The magic is that you get leverage*returns if it goes up... but you lose ALL your money if it goes down. I'm not saying that's how these index funds work, I don't know. Just beware of anything leveraged.
- deleted 10y ago[deleted]
- justrobert 10y agoThough one issue with most leveraged ETF/ETNs is how they aim to replicate the daily return of the index. So by holding it longer than a day, your returns are path dependent. So if you are holding the leveraged ETF for a month and the index has a positive return, it is still possible for you to have a negative return.