Leveraged funds can have a place in any investment portfolio . One use case I use them for is to help make trades easier in a cash structured account. Sometimes waiting for funds to settle means missing out on a trade due to the 2 day wait period. One can invest 1/3 of an allocation using a triple leveraged fund with the net result of the leverage factor still being one. This allows 2/3 of the allocation available as cash for when needing to sell this allocation and move into another. This particular example is no more risky than holding direct funds but without the ability to move into and out of safety positions.
There are also strategic moments when using leverage is useful according to various back tests. The other legitimate use case is the use as hedging when one does not want to get out of other positions for tax purposes.
These funds can be used judiciously and if done properly, can even help make a portfolio safer.
William Branch Comment On Regulatory Notice 22-08
Leveraged funds can have a place in any investment portfolio . One use case I use them for is to help make trades easier in a cash structured account. Sometimes waiting for funds to settle means missing out on a trade due to the 2 day wait period. One can invest 1/3 of an allocation using a triple leveraged fund with the net result of the leverage factor still being one. This allows 2/3 of the allocation available as cash for when needing to sell this allocation and move into another. This particular example is no more risky than holding direct funds but without the ability to move into and out of safety positions.
There are also strategic moments when using leverage is useful according to various back tests. The other legitimate use case is the use as hedging when one does not want to get out of other positions for tax purposes.
These funds can be used judiciously and if done properly, can even help make a portfolio safer.