Leveraged ETFs

Funds targeting a multiple of an index's DAILY return: powerful, and easy to misunderstand.

A leveraged ETF targets a multiple of its index's return, commonly 2x or 3x, for a single day, using swaps and futures. The key word is daily: over longer periods, returns compound path-dependently and can differ wildly from 'the index times the multiple'.

In choppy markets this compounding usually erodes value (volatility drag): an index that ends a month flat can leave a 3x fund meaningfully down. In smooth trends, compounding can exceed the naive multiple. Either way, the long-run outcome is unpredictable from the index return alone.

These funds also carry higher fees and daily rebalancing costs. Issuers themselves describe them as short-term trading tools requiring daily monitoring, not buy-and-hold positions. This site tags every leveraged and inverse fund and excludes them from yield and risk rankings by default.