ETF Closures And Splits

Summary

• Many investors assume that because leveraged ETFs move at a multiple of market volatility, an extreme down move could take them to zero and cause their closure.
• Notice that the key metric for the issuer when evaluating a fund is not its price performance but its profitability.
• Splits and reverse splits do not affect the value of a shareholder’s investment.

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With recent volatility, many readers have wondered about two issues they've read about regarding leveraged funds: can they "blow up" entirely, and what would a reverse split do to account values? I'll cover them in order.