Frequently Asked Questions about Geared Funds
- What are the investment objectives of geared funds?
- What are some common uses for geared funds?
Geared funds are valuable tools that can be used in a variety of ways by knowledgeable investors. Some examples include:
- Pursuing magnified returns (of course, losses are also magnified).
- Getting a target level of exposure using less cash.
- Helping to hedge against expected declines.
- Fine-tuning exposure (e.g., using an inverse fund to reduce exposure to a sector without selling holdings).
- What type of investor uses geared funds?
- How does a geared fund get its target level of exposure?
- Why is the performance of geared funds over time greater or less than the multiple of the index performance?
- Why do geared funds "reset" their exposure daily?
- Does the fact that these funds "reset" their exposure daily mean you shouldn't hold them for longer than a day?
- Are there strategies that can increase the chance of achieving returns close to the daily target over time?
- Why would an investor want to hold geared funds for longer periods?
- Where can I learn more about geared investing?