BetaShares Australian Equities Strong Bull Fund (ASX: GEAR) $34.28

BetaShares Australian Equities Strong Bull Fund (ASX: GEAR) is a leveraged ETF that aims to deliver between 200% and 286% of the Fund’s Net Asset Value on a given day— meaning a 1% move in the index translates to roughly a 2.5% move in GEAR, in either direction. However, we believe it’s a relatively short-term investing vehicle, not a buy-and-hold investment, because the daily rebalancing mechanism causes performance drag over time, making it suitable only for investors with a strong directional conviction over a relatively short time horizon who understand the compounding risks of leveraged products.

The ETF cost 0.78% pa, which we feel is ok for the simplified leveraged exposure, but as we said, the rebalancing cost does add up: over the last 3 years, the ASX200 has gained +11.6% while the GEAR ETF is up only +15.%, nothing like the ~25% that many people would expect. Hence, to MM, we regard this as a great ETF for sharp upside moves over 1-3 months, which is exactly what we believe is possible now, especially if a resolution around Iran does unfold.

• We can see the GEAR ETF trading above $40 in the coming months, or 15-20% higher.