Leveraged exchange-traded funds (ETFs) substantially increase the potential reward of an investment by affording investors the chance to generate double or triple the returns of the underlying securities within a portfolio. Of course, with higher reward potential comes increased risk as well. These strategies are sophisticated and typically designed for active traders rather than long-term buy-and-hold investors. Still, for those prepared to make sound investing decisions the use of leverage in ETF holdings can be a powerful way to amplify gains.
Leveraged ETFs have become increasingly popular and now cover a broad range of themes, including sector- and industry-specific focuses all the way down to magnified plays on individual stocks. Still, many investors prefer these funds for the access they provide to a basket of holdings with a single trade. Here, we explore three funds that offer exposure to an entire industry at once with powerful 3X leverage. All of these are intended as daily trades, meaning that the leverage resets daily in each case and that long-term investment in these funds is not advisable.
