Lilly Riddle at Daily Upside covered the boom in leveraged ETFs, whose assets doubled to $220 billion between late March and early June, with new products targeting everything from crypto to AI chips. She asked whether advisers are buying. Mostly, no.
I told her that I spend a lot of time pulling clients out of products that looked brilliant going in and quietly cost them later, and leveraged ETFs sit near the top of that list. The mechanics are the problem. These funds reset daily, so they can lose significant money in a flat, choppy market even when the underlying index ends up where it started. Two funds that offer 2x exposure to one bitcoin treasury company were both down about 95% for the year when the piece ran.
That does not mean the products have no use. For a trader with a short time horizon, or a sophisticated investor who monitors positions closely and exits when necessary, they can fit. Most buy-and-hold investors, and my clients, are not in that category.
If a client insists, the only responsible way to hold one is small, with a written exit rule, and with a clear understanding that the fund's daily math is working against a long holding period. Anything else is a bet dressed up as a portfolio.
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