Consequently, investors who want to protect their portfolios against rising rates could turn to inverse and leveraged ETFs that would gain as bond prices fall and interest rates rise. For instance, the Direxion Daily 20-Year Treasury Bear 3X ETF (NYSEArca: TMV), which takes the -300% daily return of long-term Treasury bonds, is one popular play to hedge fixed-income exposure.
Additionally, some active traders may find leveraged options as an attractive way to juice returns. For example, the Direxion Daily Healthcare Bull 3x Shares (NYSEArca: CURE), the triple-leveraged answer to the hot healthcare sector, has surged 14.6% year-to-date. [Triple-Leveraged Biotech ETFs Could be Coming Soon]
Nevertheless, potential investors should also understand how the geared products work and the potential risks involved. Specifically, since the ETFs rebalance on a daily basis, leveraged ETF returns can fall behindtheir intended 2x or 3x strategies in times of increased volatility. Investors would have to take a more active role in monitoring their inverse and leveraged positions. [Do You Know How Your Leveraged ETFs Work?]
Financial advisors who are interested in learning more about alternative strategies for a shifting market can register for the Wednesday, April 8 webcast here.