Before investing in these types of ETFs, investors should understand them and know the risks. They aren’t like your typical ETF. These ETFs reset daily and generally track their indexes. However, with the daily reset, compounding comes into play and an investor may see a fund drift from its benchmark. The ETFs seek to provide a multiple of the daily, weekly or monthly return of an index and are unlikely to provide returns that match these multiples beyond the ETFs respective time frame.
These ETFs do what they say they do, investors just need to make sure they understand how they work and how they might fit into their portfolio strategy.
Using the ETF Analyzer, you can search for the different inverse and leveraged funds offered by providers including ProShares, Direxion, Rydex and FactorShares.
For more information on leveraged and inverse ETFs, you can read more in our long-short ETFs category.