Is there a 3X leveraged ETF?
There are hundreds of leveraged ETFs, covering virtually every asset class and industry sector. The majority are double-leveraged, but there’s a sizeable group of triple-leveraged ETFs. Carver (2009) finds that highly levered ETFs (3× and inverse ETFs) are likely to converge to zero over longer time horizons. Avellaneda and Zhang (2010) find that leveraged funds can be used to replicate the returns of the underlying index using a dynamic rebalancing strategy.Leveraged 3X ETFs are funds that track a wide variety of asset classes, such as stocks, bonds and commodity futures, and apply leverage in order to gain three times the daily or monthly return of the respective underlying index. Such ETFs come in the long and short varieties.Carver (2009) finds that highly levered ETFs (3× and inverse ETFs) are likely to converge to zero over longer time horizons. Avellaneda and Zhang (2010) find that leveraged funds can be used to replicate the returns of the underlying index using a dynamic rebalancing strategy.Leveraged ETFs are intended for very short holding periods, typically less than a trading day. Over time, their value will tend to decay even if the underlying price moves favorably.While higher returns always sound better, leveraged and inverse ETFs are highly specialized tactical tools that should be implemented with caution. These products are primarily intended for professional traders.
Is 3X leverage risky?
Triple-leveraged (3x) exchange-traded funds (ETFs) come with substantial risk and aren’t appropriate for long-term investing. Leveraged ETFs are intended for very short holding periods, typically less than a trading day. Over time, their value will tend to decay even if the underlying price moves favorably.How long should I hold an ETF for? You can hold ETFs as long as you want. Allow compound interest to work for you over time. However, you should avoid selling ETFs when the market is down since you can miss out on the potential to gain money when the market recovers.