 |
Definition of 'Ultra ETF'
A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark. The first ultra ETFs were launched in 2006 and the class has grown to include different ETFs with underlying benchmarks ranging from broad market indexes, such as the S&P 500 and Russell 2000, to specific sectors, such as technology, healthcare and basic materials.
|
 |
Investopedia explains 'Ultra ETF'
According to the prospectuses for these funds, they may not achieve double the return of the benchmark during flat markets. Long-run returns may also diverge from the desired return; the ultra ETFs' only aim is to achieve twice the daily return, which they have done fairly accurately in the short time they can be analyzed.
Ultra ETFs can be beneficial to investors who are short on capital or allocation space within a diversified portfolio. For example, they can invest 5% of their portfolios into an ultra ETF and gain closer to 10% exposure due to the leveraged returns.
Increased daily volatility is both the biggest benefit and greatest danger of ultra ETFs. They are best suited to short-term investing strategies or quick trading to maximize a given bet in the market. The expense ratios also run much higher than for standard ETFs, as most charge 0.95% of the total assets.
|
-
Ultra ETFs can add huge returns to your portfolio, but there's a lot of risk and volatility involved with these leveraged ETFs.
Read More »
-
This specialty vehicle offers dramatic results, but can also magnify risk.
Read More »
-
To take full advantage of these vehicles, you need to know how they can fulfill certain strategies.
Read More »
-
-
This vehicle combines the diversification of a mutual fund with the flexibility of a stock. Learn more about them here.
Read More »
-
Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably.
Read More »
-
These funds burst onto the scene in 1993 and have continued to provide new opportunities for investors since.
Read More »
-
For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
Read More »
|
|
