This post from Seeking Alpha has a nice graphic on just how bizarre price movement can be in a triple leverage ETF over a longer holding period. They use, as an example, the financial sector triple leverage ETFs. Even though the Russell 1000 financials are down only about 2% YTD, both the leveraged long and leveraged inverse funds are down more than 60%.
We do not use leveraged ETFs in our Global Macro product for good reason! I’m not against giving investors the choice to use them if they want, but I do wonder how many members of the public really understand how these leveraged funds work.
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