NEW YORK (AP) – That second scoop or slice makes everything so much better. So why not double the fun investing, too?
Investors in search of supercharged returns are plugging more dollars into investments that aim to give double or even triple the daily returns of boring old index funds. But even the companies behind these investments warn that they’re not for everyone.
The industry calls these investments leveraged funds, and they use futures contracts and other trading techniques to amplify gains – and losses.
“They’re not for mom-and-pop investors,” says Michael Sapir, chief executive of ProShare Advisors, one of the biggest players in this niche of investing. “These are advanced portfolio tools to incorporate into an advanced, constructed portfolio.”
The main pitfall is that long-term returns for these thrill-ride funds can be different or even opposite from what you’d expect, because they are built to take advantage of daily market moves instead of longer trends. If the S&P 500 index is up 10 percent in a month, a double- or triple-index fund probably won’t return 20 percent or 30 percent. It could even lose money if markets are particularly volatile, like they are now, and big losses come early and are followed by smaller daily gains.