1 ETF I Wouldn't Touch With a 10-Foot Pole
Exchange-traded funds (ETFs) are compelling investments well worth considering for your portfolio. They're very much like mutual funds, often encompassing a big bunch of securities and charging an expense ratio (fee), yet they trade like stocks, allowing you to buy or sell any time the market is open, from your brokerage account.
But all ETFs aren't equal, of course. Some, such as index fund ETFs with low fees, should serve you very well over long periods. But others can be dangerous -- and hazardous to your wealth. One kind of ETF you may want to steer clear of is the leveraged ETF, and a good example is the ProShares UltraPro QQQ ETF (NASDAQ: TQQQ). Personally, I wouldn't touch it with a 10-foot pole.
In the financial world, the word "leverage" typically refers to debt, and investors who can stomach a lot of risk sometimes invest with borrowed money. An individual investor might invest "on margin," for example, using money borrowed from their brokerage. A leveraged ETF, meanwhile, is one that employs debt and/or derivatives in order to deliver amplified gains to investors. Unfortunately, it can also deliver amplified losses.
Source Fool.com
