ETFs · Risk
Geared ETFs: why beginners should tread carefully
You'll see ETFs with names hinting at 'geared' or 'leveraged' exposure. They borrow money behind the scenes so your returns move faster than the market — up and down. When markets rise, that feels brilliant. The problem is the other direction.
Losses hurt more than gains help
If something falls 50%, it then needs to rise 100% just to get back to where it started. Gearing makes those falls deeper and the climb back steeper. A normal market wobble can become a serious dent.
The quiet problem: daily reset
Many geared funds reset every day. Over a choppy, sideways stretch, that can grind your value down even if the market ends up roughly where it began. They're built for short holding periods, not for buying and forgetting — which is exactly how most people use ETFs.
Gearing doesn't just raise your returns. It raises the price of being wrong.
There's nothing evil about these products in the right hands. But for someone still finding their feet, they turn a manageable risk into one that can be hard to recover from. Walk before you add weights.
See it on your own portfolio
Find out which of these forces your ASX portfolio is most exposed to — in 60 seconds.
Keep reading
What is an ETF, in plain English?
ETFs are how most Australians now start investing. Here's the plain-English version of what they are, why people like them, and what to watch.
How to think about choosing your first ETF
Everyone wants to be told the one ETF to buy. A more useful question is what you want it to do for you. Here's a simple way to decide.
PortLens provides general information only — not personal financial advice. Examples are illustrative. Always do your own research or speak with a licensed adviser before making investment decisions.
New to a term used here? See the plain-English glossary.