Novice investors typically don’t know that most geared ETFs will usually rebalance on a daily basis, which could lead to deviations between the ETF’s target strategy and underlying index over longer periods, especially in volatile market conditions. [What Are Leveraged ETFs?]
Geared ETFs have been gaining popularity among longer term investors over the past year as a trending bull equity market augmented returns in leveraged-long ETFs due to compounding. [Leveraged ETFs Gain Popularity in Trending Markets]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.