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Do you include leveraged securities in QuietGrowth Portfolios?

No, we do not include leverage securities such as leveraged ETFs and leveraged inverse ETFs in QuietGrowth Portfolios. We believe that leveraged securities are not suitable for long-term investing as the magnified returns can be challenging to sustain over the long term.

Some of the key reasons for not preferring leveraged securities are:

  • Increased volatility: Leveraged securities use financial derivatives or debt to amplify returns, which can result in increased volatility and greater potential for losses.
  • Short-term focus: Leveraged securities are often viewed as a way to generate short-term gains because they are designed to magnify returns over a relatively short period. This approach can be riskier than a longer-term investment approach.
  • Compounding risk: The compounding of gains and losses can magnify the impact of market movements on leveraged securities, resulting in significant losses in a down market. Though the potential for gains is higher in the short term, it also means that the potential for losses is also higher.
  • Higher fees: Leveraged securities may carry higher fees than traditional securities, which can reduce returns over time.
  • Limited tracking accuracy: Using financial derivatives to achieve leveraged returns can result in tracking errors, making it difficult to predict accurately the returns of a leveraged security.

Refer to our Investment Methodology page for more information.