Very quick question, does it make sense to buy the daily leverage if you expect it to rise again in the long term anyway or do you have to pay attention to anything with the etf?
••
@Hidalidsch A triple-leveraged Nasdaq-100 ETF is risky for several reasons:
1. leverage
A 3x leveraged ETF attempts to amplify the daily return of the Nasdaq-100 by a factor of 3. If the Nasdaq-100 rises by 1% in one day, the ETF should rise by approx. 3% - but also vice versa: if the index falls by 1%, the ETF falls by approx. 3%. This means that not only gains but also losses are disproportionately amplified.
2. daily rebalancing
The leverage always refers only to the daily performance. This leads to a phenomenon called path dependency or distortion through volatility (volatility decay):
If the market moves sideways or fluctuates strongly, the ETF can underperform over a longer period of time, even if the index as a whole rises.
Example: +10%, -10% in the index does not result in 0% in the leveraged ETF, but often in a net loss.
3. extremely high volatility
The fluctuations of a triple-leveraged ETF are very high. A relatively normal market setback of 10% can lead to a 30% loss for the ETF. This requires strong nerves and good timing - which is difficult in practice.
4. not suitable for long-term investments
These products are intended for short-term speculation or day trading, not for buy-and-hold. Holding them for the long term exposes you to unnecessarily high risks.
5. cost structure
Although the running costs usually appear moderate, implicit costs can arise through daily rebalancing or through spread and tracking errors.
1. leverage
A 3x leveraged ETF attempts to amplify the daily return of the Nasdaq-100 by a factor of 3. If the Nasdaq-100 rises by 1% in one day, the ETF should rise by approx. 3% - but also vice versa: if the index falls by 1%, the ETF falls by approx. 3%. This means that not only gains but also losses are disproportionately amplified.
2. daily rebalancing
The leverage always refers only to the daily performance. This leads to a phenomenon called path dependency or distortion through volatility (volatility decay):
If the market moves sideways or fluctuates strongly, the ETF can underperform over a longer period of time, even if the index as a whole rises.
Example: +10%, -10% in the index does not result in 0% in the leveraged ETF, but often in a net loss.
3. extremely high volatility
The fluctuations of a triple-leveraged ETF are very high. A relatively normal market setback of 10% can lead to a 30% loss for the ETF. This requires strong nerves and good timing - which is difficult in practice.
4. not suitable for long-term investments
These products are intended for short-term speculation or day trading, not for buy-and-hold. Holding them for the long term exposes you to unnecessarily high risks.
5. cost structure
Although the running costs usually appear moderate, implicit costs can arise through daily rebalancing or through spread and tracking errors.
••
