Leveraged ETF Definition

Learn the definition of leveraged etf and other ETF terminology from the etf.com glossary.

Reviewed by: etf.com Staff
Edited by: etf.com Staff

Learn more about Leveraged

Leveraged ETFs are specialized investment instruments designed to magnify returns by using financial derivatives and debt. These funds aim to deliver daily returns that are a multiple (2x or 3x) of the performance of an underlying index. Leveraged ETFs provide a way for investors to amplify their market exposure without directly engaging in margin trading. While offering the potential for enhanced profits, their compounding effects and daily reset mechanisms make them complex and better suited for short-term trading, as prolonged holding can result in a significant deviation from the expected multiple due to compounding and volatility.

Related Terms

ETF Glossary is etf.com’s collection of key terms and definitions related to exchange-traded funds. ETFs are investment funds that are traded on stock exchanges, and they can encompass a wide range of asset classes, including stocks, bonds, commodities and more. Given the diverse range of ETFs and the complexity of financial markets, having a clear understanding of ETF-related terminology is instrumental for investors looking to make informed decisions, manage risks effectively and navigate the evolving landscape of ETF investments.