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Exchange-Traded Funds (ETFs) are exchange-listed investment funds that combine multiple assets into a single portfolio and trade on stock exchanges like stocks. By tracking an underlying index, commodity, or asset class, such as the S&P 500 index or gold, ETFs offer investors diversified market exposure, liquidity, and efficient access to a broad range of investment opportunities.
Beyond traditional ETFs that track an underlying index or asset, investors can also access specialised products such as Leverage ETFs and Inverse ETFs. These ETFs use more complex investment strategies and involve higher risks than traditional ETFs
Leveraged ETFs are ETFs designed to generate returns in the same direction as the underlying asset, such as 2 or 3 times the return, also referred to as 2x or 3x leverage.
They use financial instruments such as options or futures to seek returns according to the specified leverage ratio.
For example, if an investor invests in an ETF that tracks the Nasdaq 100 Index with 2x leverage, when the index increases by 1%, the ETF’s return would increase by 2%.
Inverse ETFs are similar to Leveraged ETFs but are designed to generate returns in the opposite direction of the underlying asset.
They use financial instruments similar to those used by Leveraged ETFs, such as options or futures.
For example, if an investor invests in an Inverse ETF that tracks the S&P 500 Index, when the index declines by 1%, the ETF’s return would increase by 1%.
