What is a leveraged ETF?

A leveraged ETF uses derivatives and rebalancing to target a multiple of a benchmark's daily move, such as 2x or 3x the daily return. That "daily" part is crucial.

Over longer periods, returns can diverge significantly from the simple multiple you might expect, especially in choppy markets. Compounding and volatility can make long-term results surprising.

These products can be useful for short-term tactical trades, but they carry higher risk and typically aren't meant as long-term core holdings. If you're considering one, read the fund objective carefully and understand the path-dependent behavior.