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Leveraged ETFs Can Lose 100% Of Value In Single Day

Leverage is the key to wealth. There's more than a kernel of truth in this truism, but leveraged investing can lead to large losses as well as large profits. In fact, as Sumit Roy of points out, it theoretically possible for a leveraged ETF to lose 100% of its value in a single day.

Roy credits ETF Analyst Boris Valentinov of FactSet for alerting him to the fact that ETFs can indeed go to zero in a single trading session.

"There is a way to actually go to zero, although very unlikely," Valentinov explains. "If you have, say, a 3x-leveraged fund and the market goes down by 34 percent that...