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Leveraged ETFs – Links and Resources

June 7th, 2009 Kevin

Leveraged ETFs are a relatively new instrument in the financial world. Although 2x ETFs have been around for several years now, the 3x ETFs by Direxion have really sparked people’s interest in using these leveraged ETFs as trading vehicles. Unfortunately, many mistake them as long term investment vehicles. While it is possible to buy and hold these leveraged ETFs for the long run, it is important for such investors to know the fundamental risks involved with such a strategy.

This page (Leveraged ETFs – Link and Resources) is an attempt to become a central resource for links to information regarding leveraged ETFs. As new information and articles are made available, those links will be added to the page.

List of Leveraged ETFs

Leveraged ETF List – A single list of most leveraged ETFs
Direxion ETFs – Popular 3x ETFs
ProShares ETFs – Popular 1x and 2x ETFs
Rydex ETFs – More 2x ETFs
PowerShares ETNs – 1x and 2x ETNs

Essential Links

Leveraged Decay – A simple introduction to the risks of leveraged ETFs that uses charts and images to describe the long term effects of leveraged decay. If you intend to hold on to leveraged ETFs for longer than a day, this is a must read article (I am biased, I wrote it).
Trend, Volatility, and Returns – Another must read study that goes more in depth on leveraged decay, but also covers other aspects such as compounding. Written by Connors Research, (the research division of The Connors Group) which is part of a network of sites such as TradingMarkets.com, PowerRatings.net, and TheMoneyBlogs.com.
Direxion Literature – A fantastic set of 5 articles describing the ins and outs and risks of leveraged ETFs.
Understanding ProShares’ Long Term Performance – A 2-page document that has a simple explanation of the relationship between compounding and volatility in leveraged ETFs.
On-Demand Webinar: Getting Leverage, Going Short – A must watch webinar that covers the history of Leveraged ETFs, an overview of how they work, and information on their tracking properties. Written by Matt Hougan, editor of IndexUniverse.com. The link includes a PDF of the slides if you do not want to watch the video.

Research Documents on Leveraged ETFs

The Dynamics of Leveraged and Inverse Exchange-Traded Funds
Path-dependence of Leveraged ETF returns
Long Term Performance of Leveraged ETFs

Popular Papers on Leveraged ETFs

Leveraged ETFs vs Futures
Warning: Leveraged and Inverse ETFs Kill Portfolios
Understanding Leveraged ETFs
Under the Hood of Leveraged ETFs

Other Articles

How Long Can You Hold Leveraged ETFs?
UltraShort ETFs – They work if you follow the rules
The Truth About 3x ETFs and Long Term investing
What Happens When You Hold Leveraged ETFs for More than One Day?
Leveraged and Short ETFs – 3 Flaws You Should Know
Explaining Inverse and Leveraged ETFs
FAZ 3x Financial Bear Fund Crushed

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  1. July 16th, 2009 at 11:58 | #1

    Nice work, Kevin.

    FWIW, this is the best series on leveraged ETFs I have seen to date.

    Kudos — and welcome to the blogosphere.

    -Bill

  2. July 16th, 2009 at 23:06 | #2

    Bill,

    I appreciate the comments, and I like your blog too. Thanks!

    Kevin

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