I’m Keith DeGreen and this is your Investors Minute.
Regular ETFs are inexpensive investment products designed to faithfully track the price performance of an entire index. Leveraged ETFs will rise – or fall — two or three times as rapidly as their underlying index.
For example, the ETF with the ticker “SPY”, faithfully tracks the price performance of the S&P 500. Another ETF – SSO – rises and falls twice as rapidly as the S&P, and yet another ETF – UPRO – rises and falls three times as rapidly as that index.
Just as there are many regular ETFs that track underlying indices, so too are there many leveraged ETFs. They may rise and fall more rapidly than, say, the NASDAQ 100, small caps, certain commodity indices, and even certain foreign indices.
But for reasons I’ll explain tomorrow, leveraged ETFs should only be used under specific circumstances, and never as long-term holdings.
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