Volatility Decay

Understanding the Risk: Leveraged ETFs Can Fall Even When S&P 500 Rises

Leveraged Exchange Traded Funds (ETFs) designed to amplify daily S&P 500 returns can surprisingly lose money over time, even if the index shows a net gain. This counter-intuitive outcome is primarily due to daily rebalancing and compounding, making these complex products generally unsuitable for long-term retail investors seeking amplified returns.