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Investment advice and corporate finance
Module 12Investment Management and Corporate FinanceAn index rises 10% on day 1 and falls 10% on day 2. A 2x daily leveraged ETF on the index starts at RM1.00. Ignoring fees, what is it worth after day 2?
Leveraged ETFs reset daily: day 1 +20% gives RM1.20; day 2 −20% gives 1.20 × 0.80 = RM0.96. The index itself ends at 1.10 × 0.90 = 0.99 (−1%), and twice that, RM0.98, is what a holder might expect, but daily compounding makes the loss larger in a volatile, flat market. RM1.00 assumes the two moves cancel. RM0.99 is the index's own result. Source: SIDC Module 7 Study Outline (Jul-Dec 2026) Topic 7 Exchange-traded Funds; SC Guidelines on Exchange-Traded Funds (revised, in operation from 2 January 2019; SC media release 'SC revises ETF guidelines to boost retail participation', sc.com.my) (as at October 2026).
Expecting a leveraged ETF to deliver its multiple of the index return over several days.
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