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Are ETFs tracking Short/Leveraged equity indices suitable for buy & hold investing?

April 26, 2017buy equity ETFs hold indices Investing leveraged short suitable

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Are ETFs tracking Short/Leveraged equity indices suitable for buy & hold investing?

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ETFs tracking short/leveraged equity indices are designed to provide 2x or -2x times the daily % change in the reference index (for example, the FTSE 100 Leveraged Index is designed to provide twice the daily percentage change in the level of the FTSE 100 Index). Investors who choose to hold the ETFs for periods longer than one day should acknowledge that these products are designed for short-term investment strategies and that the ETF return may not equal 2x or -2x the change in the Index over periods longer than one day. This is due to the daily rebalancing of the leveraged/short index and also the fact that volatility due to leverage in the reference index tends to magnify gains and losses in the 2x leveraged or 2x short index. Additionally, increased market volatility and longer holding periods may accentuate the effects of daily rebalancing and leverage and as a result, your investment may not perform as you expect.