BetaShares Geared Australian Equities ETF (GEAR) $34.13

The GEAR ETF, traded on the ASX, is a bullish ETF for leveraged exposure to the ASX200; as would be expected, the five largest holdings are CBA, BHP, NAB, WBC and CSL. Fees are 0.8% pa, while dividends are paid twice a year in June and December. However, the GEAR’s real interest is its gearing, which is currently around 2.24x; hence, if the ASX 200 Index goes up 1% today, the ETF would be expected to go up approximately 2.24% before fees and expenses. Note that the Fund is actively managed, and the gearing multiple will change slightly daily, affecting returns over time.

The ETF does its job particularly well over the short term: over the last three months, the ASX200 has rallied 7.5% while the GEAR ETF has gained 15.8%, around 2.1x. However, as the chart below illustrates, gearing is a two-edged sword, with the GEAR falling much faster than the ASX200 when it experiences periods of weakness.

• We like the GEAR ETF if/when we experience dips over the coming months, but the risk/reward of chasing strength at this stage of the cycle is unappealing.