Investing Insights
A Better Way to Use Leverage in Your ETF Portfolio
Nov 1, 2024
Bryan Armour, Director of Passive Strategies Research at Morningstar, shares insights on effectively using leverage in ETF portfolios. He discusses promising leveraged ETFs while addressing volatility drag and risks associated with them. Travis Miller, a strategist covering energy, dives into how tech companies are turning to nuclear energy to meet the surging demands of data centers. He explains the potential of small modular reactors in providing stable, carbon-free electricity, amidst the growing need for energy in the AI landscape.
26:16
Episode guests
AI Summary
AI Chapters
Episode notes
Podcast summary created with Snipd AI
Quick takeaways
- Leveraging investments can amplify returns but carries risks, particularly due to volatility drag in leveraged ETFs affecting long-term performance.
- Tech companies are increasingly exploring nuclear energy, particularly small modular reactors, to meet the high energy demands of data centers sustainably.
Deep dives
Understanding Leverage and Its Risks
Leverage involves borrowing funds to invest, which can amplify returns but also increases risk. While it can lead to significant gains, poor market conditions can trigger losses and result in costly margin calls, making leverage a controversial and often detrimental tool for investors. Historical examples, such as the financial issues faced by Lehman Brothers and other leveraged entities during downturns, illustrate the potential dangers of using borrowed capital. Furthermore, leveraged exchange-traded funds (ETFs) have notably suffered from volatility drag, where the need to constantly adjust exposure in turbulent markets leads to steep declines in performance.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
