Investors Use Leveraged ETFs for Long-Term Wealth Building

Investors in the United States and South Korea are increasingly using leveraged exchange-traded funds (ETFs) for long-term wealth building and arbitrage, diverging from the products' intended use as short-term day trading tools. Global assets in leveraged ETFs exceeded $200 billion for the first time in 2024.

In South Korea, Song Wonjun, a former dentist, has gained hundreds of thousands of followers by promoting "Infinite Buying" and "Value Rebalancing" strategies, claiming these methods allowed him to retire at 44. Meanwhile, in the U.S., Research Affiliates founder Rob Arnott utilizes a "double short" strategy to profit from the erosion caused by daily rebalancing.

Industry leaders have cautioned against these practices. Amplify ETFs CEO Christian Magoon warned that these tools can severely impair portfolios if used as retirement plans. Jose Carlos Gonzales of Leverage Shares noted that the daily reset mechanism works against investors who hold these products over long periods. Recent volatility in South Korean AI-driven tech stocks, such as Samsung Electronics Co. and SK Hynix, has highlighted the risks associated with these amplified returns.