| The daily results of an inverse exchange traded | | | | they are held for longer than a day, the returns |
| fund are based on the inverse daily performance | | | | will vary from this multiple. |
| of the underlying benchmark or index. A range of | | | | A leveraged ETF works by using a number of |
| derivatives including index swaps and futures | | | | derivatives, for example index swaps and futures |
| contracts are used to meet the objectives of the | | | | contracts, in order to provide this multiple of the |
| investment in order to generate results that are | | | | market exposure for the stocks in the fund. The |
| opposite to the underlying benchmark or index. | | | | risks are higher in a leveraged fund, as losses will |
| This means that the ETF goes up when the | | | | also be multiplied by the same amount. |
| benchmark or index goes down, and vice versa. | | | | Both inverse and leveraged exchange traded |
| An investment in an ETF is rather like holding | | | | funds are designed to be only held short term; |
| short positions, or profiting from declining prices, | | | | which for a leveraged fund can mean just a single |
| thanks to a combination of advanced investment | | | | day. Investors looking to hold a longer term |
| strategies. | | | | security should not consider them. Long term, a |
| The results of leveraged exchange traded fund | | | | leveraged fund can drift away from its |
| are generated as a multiple of the daily | | | | benchmark due to the effects of compounding, |
| performance return of the underlying benchmark | | | | especially during periods of market volatility. |
| or index. This could be a 200% return, for | | | | Investors should make sure that they understand |
| example. However, they will not provide the same | | | | the nature of exchange traded funds before they |
| multiple over the long term. In a single day, a | | | | put any money into it, and that they are clear on |
| leveraged ETF will generally meet the objective | | | | the risks involved in such an investment. |
| for the multiple of the daily performance, but if | | | | |