Leveraged ETF Rout Shows How Daily Reset Can Destroy Wealth

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โดย 24/7 Wall St.·Read original
Summary · why it matters

Yesterday's technology sell-off demonstrated how leveraged ETFs can accelerate losses, with the 3x leveraged Direxion Daily Semiconductor Bull 3X ETF plunging more than 23% as the PHLX Semiconductor Index dropped 7.9%. Total U.S. leveraged ETF assets have surged to a record $198 billion, up 55% in months, driven by products like the ProShares UltraPro QQQ 3x Shares, which now holds roughly $40 billion, and the Direxion Daily Semiconductor Bull 3X ETF, whose assets have more than tripled since April to approximately $34 billion. These funds use derivatives and borrowed money to reset daily, meaning a 23% loss requires a nearly 30% gain just to break even, and long-term returns often diverge from the underlying index. The sell-off served as a reminder that leverage works both ways, and fund prospectuses consistently describe these products as trading vehicles rather than long-term investments.

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