Hi Equity Mates,
I hope you're well.
I have a question/scenario where I feel like I'm missing something obvious...
Geared ETFs. I understand that with the gearing it amplifies your gains but also your losses (in a nutshell). However, if we are investing for the long term (let's call this 10+ years) and we are living by the principals that the stock market always recovers and over the long term will increase. In other words, more gains than losses, then why on earth isn't everyone invested in geared ETFs (that cover broad indexes like A200 or MSCI world for instance) where the outcome seems so blatantly obviously that under gearing over the long term you would outperform the traditional non-geared versions of the same ETF?
Note: assumption made, the increased MER on a geared ETF does not eat away all the percentage outperformance the geared ETF might have over the non-geared ETF.
Appreciate any insight you EMs have!