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Leveraged ETFs vs. Futures: Where Is the Missing Performance?
Leveraged ETFs have garnered plenty of attention of late, for a couple of reasons: They provide an alternative way for investors to deploy leverage in their investment portfolio. They also provide investors a way to "short" the market, either as a hedging or speculative tool. One of the knocks on leveraged ETFs is the observation that they tend to underperform their respective indexes (after adjusting for their leverage level). In this article, we highlight one very important source of the under-performance, and discuss some possible remedies using equity index futures and options.
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