𝗟𝗲𝘃𝗲𝗿𝗮𝗴𝗲𝗱 𝗘𝗧𝗙 🚀

I want to talk about a "risk" product: leveraged ETFs, which are available on eToro. 📈

What is leverage? – It’s using borrowed money to maximize both GAINS and LOSSES. ⚖️

LOSSES 📉 - When you use leverage, you are borrowing money, which means you’re investing cash you don’t actually have. In the event of a market correction, you could lose everything… just ask Archegos Capital (link below). It doesn't matter how much money you make, how much wealth you have, what assets you hold, or how knowledgeable you are: if you are leveraged and market conditions suddenly turn against you, for whatever reason… you are going to lose A LOT. 💥

GAINS 🚀 – Now for the other side of the coin (there are always two sides). By being leveraged, you gain much more by investing money that isn't yours and reaping the returns on it in exchange for a fee. But remember: volatility, both to the upside and downside, will be massive. 🎢

VOLATILITY ⚡ - If you are leveraged, volatility doesn't just shoot up like a handgun—it explodes like a bazooka. In the case of 5x leverage (you invest $100, but the actual market position is $500), if the asset or market drops by 20%, you drop by 100% (20 x 5 = 100). 💣

REGULATION 📜 – As a rule, retail investors cannot set a stop-loss above 50% on high-risk products without providing extra collateral (adding more funds). This rule exists to protect retail traders from potential lack of experience, and you’ll see it when opening leveraged positions or short selling. Personally, I advise against both options for everyone—not just retail investors. 🛑

TIMING ⏱️ – To use leverage and survive, you need to get your timing spot-on. Since timing the market in the short term is practically impossible, making huge gains with leverage relies heavily on pure luck. 🎲

FEES 💰 – If someone lends you money, they do it to collect fees, and these are usually very high. When you combine the risk of total loss with high borrowing costs, it’s clear this isn't a great product. ❌

HISTORY 🏛️ – Every respected investor will tell you to avoid leverage. Mind you, they say avoid, NOT never use it—there’s a difference. During a severe market crash, when panic drives prices to irrational lows and you’ve already deployed all your cash, that’s when leveraging up to buy cheaper assets might make sense. 📉🛒

But Sarcako, didn't you just say timing the market is impossible? If we don't know where the bottom is, how can we get it right? 🤔 – Exactly, you won't get it right, not even with luck. However, there is a specific product that can be useful in those scenarios: 3X BULL Leveraged ETFs. 🐂

What is an ETF? An ETF is like a custom index made up of a specific basket of assets (e.g., tech or healthcare). It works similarly to eToro’s Smart Portfolios, with the main difference being the fee structure. 📦
What does 3X Bull mean? It means the ETF holds long positions and is 3x leveraged internally. Notice I said the ETF is leveraged—you aren't directly borrowing on margin. Therefore, you don't need to set a mandatory stop-loss or pay direct leverage fees to eToro. 📊
Can I lose 100%? No. Even without a stop-loss, you won't lose 100%. You might temporarily drop 99.9%, but the position won't close out automatically because the underlying assets still retain some value. Just remember: leverage always equals extreme volatility—don't be surprised to see your position down 50% in a matter of days.

So during a market crash, when general fear makes EVERYTHING cheap, I’d bet on these ETFs rather than picking individual stocks. 💡

Keep these two final concepts in mind:

Volatility Decay (Drag Effect): If the market drops continuously over several days or months by, say, 20%, the 3x ETF won't just drop 60%—it will drop even more due to daily compounding during a prolonged downturn. The duration of the bear market matters. (Note: this same compounding mechanism works to your advantage during a sustained rally). 🔄
Historical Returns: Historically, these ETFs have performed well, yielding roughly 30% annually. However, that only happens during bull markets. The strategy is to enter them during bear markets—fully aware of high volatility and decay—and gradually exit during the bull run without getting greedy. They are NOT 10-year buy-and-hold products, nor should they make up a huge portion of your portfolio—just a reasonable percentage for a specific timeframe. 📈🎯