Why 3x ETFs Are Riskier Than You Might Think
Suppose you’re sure you can make a trade now that would net you a 5% gain. That would be great, but what if you could instead net a 15% profit? That’s the appeal of triple-leveraged (3x) exchange-traded funds (ETFs), investments that aim to triple the returns of the markets they track. But this magnification of gains has a flip side that some investors don’t fully grasp until it’s too late.
For experienced day traders, 3x ETFs can be worthwhile and beneficial tools. However, these products hide mathematical quirks that make them ticking time bombs for long-term investors. Even a choppy but flat market can steadily erode significant value through compounding—meaning you could lose money even when the market ends up exactly where it…
