Why Leveraged ETFs Don't Match Market Performance

No product on Wall Street draws more criticism than leveraged ETFs. Leverage funds are designed to multiply the performance of indexes, but often do so poorly in the long run. These products were built for traders - not investors. They match the daily return of the underlying index and multiply that.

As such, over time, the returns start to get very skewed. The longer you hold onto these leveraged ETF products, the bigger the disparity in returns you'll see (and it's not in your favor). This is called decay - specifically leveraged ETF decay.

So, why does it happen? Let's check it out.