Digit
headset_mic account_circle
mail
Sign In
  • Products

    Motor

    • Car Insurance
    • Two Wheeler/Bike Insurance
    • Commercial Vehicle Insurance
    • Taxi/Cab Insurance
    • Auto Rickshaw Insurance
    • Truck Insurance

    Health

    • Health Insurance
    • Super Top-up Health Insurance
    • OPD Health Insurance
    • Arogya Sanjeevani Policy
    • Personal Accident Insurance
    • Corporate Health Insurance

    Other

    • International Travel Insurance
    • Flight Delay
    • Shop Insurance
    • Home Insurance
  • Claims

    • File a Claim
    • File Health Claim
    • File Motor Claim for Garages
    • COVID-19 Assistance
    • Claim Status
  • Renewals
  • Become an Agent
  • Digit Products

    Motor Insurance

    • Car Insurance 25% OFF
    • Two Wheeler/Bike Insurance
    • Commercial Vehicle Insurance
    • Taxi/Cab Insurance 15% OFF
    • Auto Rickshaw Insurance
    • Truck Insurance

    Health Insurance

    • Health Insurance
    • Super Top-Up Health Insurance
    • OPD Health Insurance
    • Arogya Sanjeevani Policy
    • Personal Accident Insurance
    • Corporate Health Insurance

    Other Insurance

    • International Travel Insurance
    • Flight Delay
    • Shop Insurance
    • Home Insurance
  • Claims

    File a Claim

    File Health Claim

    File Motor Claim for Garages

    COVID-19 Assistance

    Claim Status

  • Renewals

    Become an Agent

  • Support
    Sign In
    • edit Edit Policy
    • download Download Policy
    • person_pin My Service Requests
    • check Check Policy Status
    call 1800 103 4448 whatsapp 70260 61234 mail_outline hello@godigit.com

    Our WhatsApp number cannot be used for calls. This is a chat only number.

  • My Account
    account_circle
    • autorenew Renew My Policy
    • download Download My Policy
    logout SIGN OUT
    call 1800 103 4448 whatsapp 70260 61234 mail_outline hello@godigit.com

    Our WhatsApp number cannot be used for calls. This is a chat only number.

  • login
  • about
  • contact
  • careers
More Products

Motor

  • Car Insurance
  • Two Wheeler/Bike Insurance
  • Commercial Vehicle Insurance
  • Taxi/Cab Insurance
  • Auto Rickshaw Insurance
  • Truck Insurance

Health

  • Health Insurance
  • Super Top-up Health Insurance
  • OPD Health Insurance
  • Arogya Sanjeevani Policy
  • Personal Accident Insurance
  • Corporate Health Insurance

Other

  • International Travel Insurance
  • Flight Delay
  • Shop Insurance
  • Home Insurance

Support

close
account_circle
  • edit Edit Policy
  • download Download Policy
  • person_pin My Service Requests
  • check Check Policy Status
  • autorenew Renew My Policy
  • download Download My Policy
logout SIGN OUT
call 1800 103 4448 whatsapp 70260 61234 mail_outline hello@godigit.com

Our WhatsApp number cannot be used for calls. This is a chat only number.

Switch to Digit Insurance

Trusted by 2 crore Indians

  • 1 Year Waiting Period
    Health
    Health
  • Car Side View
    Car
  • trending icon

    Third-party premium has changed from 1st June. Renew now

    Motorcycle Side View
    Bike
  • auto rikshaw
    Commercial
  • COVID-19 covered
    Travel Airplane
    Travel
  • More products
    More
ENTER YOUR CAR NUMBER
keyboard_arrow_right
DON'T KNOW YOUR CAR NUMBER?
keyboard_arrow_right
renew digit policy keyboard_arrow_right

I agree to the  Terms & Conditions

Terms and conditions

    Enter valid registration number
    Please enter valid City name
    DON'T KNOW REGISTRATION NUMBER?
    keyboard_arrow_right
    I KNOW MY REGISTRATION NUMBER
    keyboard_arrow_right
    IT'S A NEW BIKE
    keyboard_arrow_right
    RENEW DIGIT POLICY
    keyboard_arrow_right

    I agree to the  Terms & Conditions

    keyboard_arrow_right
    IT'S A NEW BIKE
    keyboard_arrow_right
    RENEW DIGIT POLICY
    keyboard_arrow_right

    I agree to the  Terms & Conditions

    Most Popular(You can select more than one)

    I agree to the  Terms & Conditions

    As mandated by Spanish Authorities your travel insurance needs to extend 15 days after your trip ends.
    We will extend your coverage period accordingly.

    false false false false false false false false false false false false
    close

    Port my existing Policy

    keyboard_arrow_right
    or renew digit policy keyboard_arrow_right

    I agree to the  Terms & Conditions

    You can select more than one member

    • -+ Max kids
      (s)
    ENTER YOUR REGISTRATION NUMBER
    keyboard_arrow_right
    DON'T KNOW YOUR REGISTRATION NUMBER
    keyboard_arrow_right
    or renew digit policy keyboard_arrow_right

    I agree to the  Terms & Conditions

    Terms and conditions

    Terms and conditions

    Switch to Digit Insurance
    • Health
    • Car
    • Bike
    • Commercial
    • Travel
    • More Products

    Leveraged Funds - Benefits, Types, Risks & Drawbacks

    leveraged funds
    (Source: investopedia)

    Investors are constantly playing their cards to bring out the maximum returns from their investment. Leveraged funds are one such way to knock the stock market’s overall performance. These funds hold both debt and shareholder equity and use the debt to optimise the returns.

    Read further to know more about this ETF in detail.

     

    What Are Leveraged Funds?

    These are mutual funds that utilise financial leveraged investment techniques to maximise returns. These techniques include trading, buying assets on margin, short selling, etc. Leveraged ETFs provide a multiple of the index or benchmark that they track.

    These ETFs typically utilise derivatives like options, futures and swaps to amplify the performance. Below is a brief discussion of how they work.

    How Do Leveraged Funds Work?

    Leveraged funds function through standard brokerage accounts, using margin. Investors borrow money from brokerages to purchase stocks intending higher gains. In simple words, you buy a larger portion in much smaller capital.

    For instance, you buy mutual funds worth ₹ 60,000 and borrow ₹ 60,000 for additional investments. Thus, returns will be relatively higher than the initial investment with an increase in the mutual fund’s value.

    However, this brings a risk of experiencing significantly higher loss in case of a dip in the mutual fund’s value. Therefore, the investment will depend totally upon the investor’s risk appetite. Also, the cost of operating leveraged mutual funds is much higher than other funds. The expense ratio may range between 3% and 5% a year.

    What Are the Benefits of Leveraged Funds?

    Here are some benefits of these exchange-traded funds -

    1. Ease of Tracking the Index

    These funds track the underlying index thoroughly, which eases your investment strategies. This is better than relying on the data of a certain type of mutual fund. These funds also ensure lower exposure to risk and excellent investment performance.

    2. High Returns Regardless of Investment

    Leveraged funds ensure high returns to all the investors regardless of their investment. Investors who opt for a shorter tenure gain similar returns than those who invest for longer.

    3. Absence of Per-Trade Transaction Expense

    These types of mutual funds come with the benefit of not having per-trade transaction costs. This encourages the investors towards short-term swing trades.

    4. Cost-Effectiveness

    With the advantage of not having per-trade transaction costs, these also have no performance fees. Therefore, you can invest small instead of a lump sum according to your financial convenience over a course of time.

    5. Diversification

    A diversified portfolio is somewhat challenging with small investments in the capital market. But fortunately, these ETFs allow attaining a diversified portfolio that ensures optimum returns and low risk.

    What Are the Different Types of Leveraged Funds?

    The following table shows all the types of leveraged funds.

    Types

    Explainations

    Money Market Funds

    Such ETFs invest in government bonds such as treasury bills (short-term)

    Bond Funds

    These funds invest in fixed-income assets such as bonds, debentures, treasury bills, and mortgages.

    Equity Funds

    Mutual funds that invest in the stock market, covering top categories like healthcare, IT and telecommunication, industrials, financials, etc.

    Index Funds

    These ETFs invest in assets that generate fixed income and follow a specific index like NIFTY 50, SENSEX, etc.

    Balanced Funds

    Such leveraged ETFs invest in a combination of bonds and stocks where holdings are balanced between debt and equity.

    Specialty Funds

    Funds like these invest only in distinct assets such as real estate, currencies, funds of funds, etc.

    What Are the Risks and Drawbacks of Leveraged Funds?

    Some cons of leveraged funds are stated below -

    • These funds do not exactly reflect the daily returns of the index they follow in the long run.
    • The expanded daily returns may provoke abrupt losses in the short term. It may also result in a loss of the funds’ value.
    • Certain leveraged ETFs are not likely to trade copiously, which restricts your capacity to sell or buy.
    • As they use derivatives to amplify returns, these funds do not track the underlying benchmark carefully.

    Investors must keep in mind their tolerance of risk before opting for investing in leveraged funds. Additionally, they must consider the higher expense ratio, their investment horizon and other factors that may influence their investment strategy. Lastly, it is crucial to acquire proper market experience before investing in such ETFs.

    Frequently Asked Questions

    ✓ What are leveraged 2X funds?

    Leveraged 2X funds utilise leverage to double the daily return of the underlying index or benchmark. These funds track a wide range of asset categories, like bonds, stocks or commodity futures.

    Leveraged 2X funds utilise leverage to double the daily return of the underlying index or benchmark. These funds track a wide range of asset categories, like bonds, stocks or commodity futures.

    ✓ How does a leveraged ETF perform in the long run?

    Leverage funds boost the performance of indexes but fail to do so in the long run. These funds mirror the daily returns of an underlying index and optimise that. Therefore, the returns start getting crooked over a longer course of time.

    Leverage funds boost the performance of indexes but fail to do so in the long run. These funds mirror the daily returns of an underlying index and optimise that. Therefore, the returns start getting crooked over a longer course of time.

    ✓ Can leveraged 3X funds be safe?

    Triple-leveraged mutual funds are subject to considerable risk for long-term investments. These are not appropriate for investors but traders who exchange these funds within a short span.

    Triple-leveraged mutual funds are subject to considerable risk for long-term investments. These are not appropriate for investors but traders who exchange these funds within a short span.

    Please try one more time!

    Request URL:
    Status Code:
    Request Payload:
    Response Data:

    Important Articles about Investment Related Topics

    Income Fund

    Unit Linked Insurance Plan ULIP

    ELSS Mutual Funds

    Equity Mutual Funds

    SIP vs Lumpsum Investments in Mutual Funds

    Lumpsum Investment in Mutual Funds

    What is SIP in Mutual Funds

    Hybrid Mutual Funds

    Balanced Mutual Funds

    Money Market Funds

    Debt Funds

    ULIP vs Mutual Funds

    What Are Mutual Funds?

    What Are Index Mutual Funds?

    What Are Growth Mutual Funds?

    Capital Protection Mutual Funds

    Commodity Mutual Funds

    Exchange-Traded Funds

    Difference between ETF vs Mutual Funds

    Difference Between Direct and Regular Mutual Funds

    Statutory Liquidity Ratio (SLR)

    Different Types of Mutual Funds in India

    Leveraged Funds

    International Mutual Funds

    Differences Between ETF and FOF

    Show more

    Important Articles related to Finance

    Employee Provident Fund

    EPF Registration Process

    How to Withdraw EPF Online

    Atal Pension Yojana Calculator

    How to Change Details in Atal Pension Yojana Scheme

    How to get Atal Pension Yojana Statement

    How to Close Atal Pension Yojana Account

    Sukanya Samriddhi Yojana

    How to Open Sukanya Samriddhi Yojana Account

    Sukanya Samriddhi Yojana Calculator

    What is Public Provident Fund?

    How to Open PPF Account?

    How to Check PPF Account Balance?

    Eligibility Criteria to Open PPF Account

    Types of PPF Forms

    How to Withdraw PPF Online?

    How to Invest in PPF?

    Financial Planning for Salaried Employees

    Importance of Financial Planning

    Financial Planning Tips for Women

    How to Apply for Atal Pension Yojana?

    What is UAN Number?

    How to check EPF Balance

    KVP Calculator

    Voluntary Provident Fund

    Difference between EPF and EPS

    How to Check Sukanya Samriddhi Account Balance?

    Investment Planning Guides

    Professional Tax in India

    Show more

    Disclaimer: This information is added only for informative purposes and collected from different sources across the Internet. Digit Insurance is not promoting or recommending anything here. Please verify the information before making any decisions.

    View Instant Premium

    Switch to Digit Insurance

    close
    digit
    Health
    digit
    Car
    digit
    Bike
    digit
    Commercial
    digit
    Travel
    digit
    Property
    1. Digit Insurance
    2. Finance
    3. Investment Planning & Other Important Information
    4. Leverage Funds

    Last updated: 2022-06-15

    Digit
    • about
    • contact
    • career
    Products
    • Car Insurance
    • Bike Insurance
    • Travel Insurance
    • Health Insurance
    • Property Insurance
    • Shop Insurance
    • Group Health Insurance
    • Arogya Sanjeevani Policy
    • Commercial Vehicle Insurance
    • Super Top-up Health Insurance
    • Flight Delay
    Resources
    • Blog
    • Press
    • Download Policy
    • Grievance Redressal Procedure
    • Cancel e-Mandate
    Agent & Partnerships
    • Become an Agent
    • Become Digit POSP
    • Garages claim intimation
    Services
    • Claims
    • Renewals
    • Digit Cashless Garages
    • Digit Cashless Hospitals
    Get our app
    Download man
    App Store Google Play

    Other Products
    • Fire Insurance
    • Burglary Insurance
    • Building Insurance
    • Bus Insurance
    • Tractor Insurance
    • Commercial Van Insurance
    • Passenger Carrying Vehicle Insurance
    • Heavy Vehicle Insurance
    • Goods Carrying Vehicle Insurance
    • Activa Insurance
    • Jupiter Insurance
    • Bullet Insurance
    Health Insurance Guides
    • Individual Health Insurance
    • Family Health Insurance
    • Health Insurance for Parents
    • Health Insurance Premium Calculator
    • Compare Health Insurance
    • Health Insurance for Senior Citizens
    • Health Insurance with Maternity Cover
    • Corona Kavach Policy
    • Corona Rakshak Policy
    • हेल्थ इन्शुरन्स
    • फैमिली हेल्थ इन्शुरन्स
    Car Insurance Guides
    • Third Party Car Insurance
    • Comprehensive Car Insurance
    • Zero Depreciation Car Insurance
    • NCB in Car Insurance
    • IDV Calculator for Car
    • Bumper to Bumper Car Insurance
    • Car Insurance Calculator
    • Own Damage Car Insurance
    • Comprehensive vs Third Party Insurance
    • Compare Car Insurance
    • Find Vehicle Registration Details Online
    Bike Insurance Guides
    • Third Party Bike Insurance
    • Comprehensive Bike Insurance
    • Zero Depreciation Bike Insurance
    • NCB in Two Wheeler Insurance
    • IDV Value Calculator for Bike
    • Add-on Cover in Bike Insurance
    • Bike Insurance Calculator
    • Own Damage Bike Insurance
    • Comprehensive vs Third Party Bike Insurance
    • Compare Bike Insurance
    • Royal Enfield Insurance
    • TVS Insurance
    • Hero Bike Insurance
    Other Guides
    • Types of Insurance
    • Types of General Insurance
    • Types of Motor Insurance
    • International Driving License
    • Visa on Arrival for Indians
    • Visa Free Countries for Indians
    • Comprehensive vs Zero Depreciation
    • Coronavirus Health Insurance
    • Coronavirus Symptoms Checker
    • Indian Passport Rank
    • Digit Illness Group Insurance
    • Hero Splendor Insurance
    • Access Insurance
    • Scooty Insurance
    Calculators
    • SME Buddy Calculator
    • Home Loan EMI Calculator
    • Bike Loan EMI Calculator
    • Car Loan EMI Calculator
    • HRA Exemption Calculator
    • Sukanya Samriddhi Yojana Calculator
    • SIP Calculator
    • RD Calculator
    • SWP Calculator
    • GST Calculator
    • PPF Calculator
    • Personal Loan EMI Calculator
    • EMI Calculator
    • Individual Income Tax Slab
    • Tax Saving Options other than 80C
    Finance Guides
    • What is Credit Score
    • Public Provident Fund
    • How to Open PPF Account?
    • How to open Sukanya Samriddhi Account
    • What is GST?
    • GST Registration in India
    • PAN Card
    • Aadhaar Card
    • Property Tax
    • Road Tax
    • Passport Process
    • Income Tax Slabs
    • How to Save Income Tax in India
    • Tax Deductions under Section 80C
    Traffic Rules
    • PUC Certificate
    • Vehicle Registration Certificate
    • New Traffic Fines
    • Fine for Driving without Helmet
    • Types of Driving Licence in India
    • Driving Licence in Delhi
    • Driving Licence in Bangalore
    • Driving Licence in Jaipur
    • Bangalore Traffic Fines
    • Pune RTO Fine
    • Own Damage Insurance
    Business Products
    • Business Insurance
    • Management Liability Insurance
    • General Liability Insurance
    • Workmen Compensation Insurance
    • Fidelity Insurance
    • Professional Liability Insurance
    • Money Insurance Policy
    • Sign Board Insurance
    • Plate Glass Insurance
    • Erection All Risk Insurance
    • Contractors' All Risks Insurance
    • Directors and Officers Liability Insurance
    • Marine Cargo Insurance
    • Contractors Plant and Machinery Insurance
    RTO Offices in India
    • RTO Office
    • RTO Pune
    • RTO Ahmedabad
    • RTO Bangalore
    • RTO Mumbai
    • RTO Delhi
    • RTO Lucknow
    • RTO Thane
    • RTO Chennai
    Important Links
    • Digit Insurance Reviews
    • Car Insurance Reviews
    • Bike Insurance Reviews
    • Commercial Vehicle Insurance Reviews
    • Travel Insurance Reviews
    • Health Insurance Reviews
    • Mobile Insurance Reviews
    • Become a Digit Partner
    • General Insurance Agent
    • Health Insurance Agent
    • Motor Insurance Agent
    Car Brands & Models
    • Maruti Insurance
    • Toyota Car Insurance
    • Tata Car Insurance
    • Hyundai Car Insurance
    • Kia Car Insurance
    • Mahindra Car Insurance
    • Tata Tiago Insurance
    • Tata Nexon Insurance
    • Hyundai i20 Insurance
    • Creta Insurance
    • Baleno Insurance
    Downloads Do Not Disturb (DND) Public Disclosures Stewardship Policy IRDAI Privacy Policy

    CIN: U66010PN2016PLC167410, IRDAI Reg. No. 158.

    Go Digit General Insurance Limited (formerly known as Oben General Insurance Ltd.) - Registered Office Address - 1 to 6 floors, Ananta One (AR One), Pride Hotel Lane, Narveer Tanaji Wadi, City Survey No.1579, Shivaji Nagar, Pune-411005, Maharashtra | Corporate Office Address - Atlantis, 95, 4th B Cross Road, Koramangala Industrial Layout, 5th Block, Bengaluru-560095, Karnataka