-3x Inverse Bond

-3x bond mutual funds and ETFs seek to achieve 3 times the... -3x bond mutual funds and ETFs seek to achieve 3 times the inverse return of a fixed-income index. For example, a -3x leveraged U.S. Treasury mutual fund or ETF will aim to return -3 times the daily return of the U.S. Treasury bond index of a specified duration. It’s important to note that given how often these funds are rebalanced, the effects of compounding mean that they will only achieve their targeted return on a day-to-day basis. For instance, a fund that seeks 3 times the inverse daily return of 10-year U.S. Treasury bond index will almost certainly not achieve triple the inverse monthly return of the index. Over time, these types of mutual funds and ETFs decay given the rebalancing process. Inverse bond mutual funds and ETFs may be appropriate for experienced, aggressive traders who have a bearish view on a particular fixed income security. Moreover, a -3x bond mutual fund and ETF carry higher risk than a -1x and -2x bond fund due to higher leverage. Long-term, conservative-minded investors should look to invest in unleveraged fixed income ETF or mutual fund, which simply holds traditional debt securities. Last Updated: 04/18/2024 View more View less

-3x bond mutual funds and ETFs seek to achieve 3 times the inverse return of a fixed-income index. For example, a -3x leveraged U.S. Treasury mutual fund or ETF will aim to return... -3x bond mutual funds and ETFs seek to achieve 3 times the inverse return of a fixed-income index. For example, a -3x leveraged U.S. Treasury mutual fund or ETF will aim to return -3 times the daily return of the U.S. Treasury bond index of a specified duration. It’s important to note that given how often these funds are rebalanced, the effects of compounding mean that they will only achieve their targeted return on a day-to-day basis. For instance, a fund that seeks 3 times the inverse daily return of 10-year U.S. Treasury bond index will almost certainly not achieve triple the inverse monthly return of the index. Over time, these types of mutual funds and ETFs decay given the rebalancing process. Inverse bond mutual funds and ETFs may be appropriate for experienced, aggressive traders who have a bearish view on a particular fixed income security. Moreover, a -3x bond mutual fund and ETF carry higher risk than a -1x and -2x bond fund due to higher leverage. Long-term, conservative-minded investors should look to invest in unleveraged fixed income ETF or mutual fund, which simply holds traditional debt securities. Last Updated: 04/18/2024 View more View less