Question

"A wealthy, sophisticated investor with a high risk tolerance has just turned extremely bullish on the market. To profit from this, the BEST recommendation to the client would be to:"

Answer 1

Answer:

Buy leveraged ETFs

Explanation:

the options are missing:

A. But index calls

B. Buy index puts

C. But inverse ETFs

D. Buy leveraged ETFs

Leveraged ETFs (exchange-traded funds) are risky investments that can yield very high returns but of course also involve a large risk. Usually normal ETFs work on a 1:1 basis, leveraged ETFs work on a 200% to 300% basis, this means that for every dollar invested, it will borrow 1 or 2 dollars more and invest them.

An ETF follows a stock index, e.g. Nasdaq, S%&P 500, etc., and when the index increases by 1%, it will also increase by 1%. If the ETF is leveraged, the possibilities of gains or losses multiplies by 2 or 3.