ETF Strategist

Leveraged ETFs: The risks and the rewards

Leveraged ETFs complicated & risky

With the rebound on Wall Street since the 2008 financial crisis, a growing number of complicated and potentially risky products are being aimed at Main Street.

One such vehicle is leveraged ETFs, which make up about 2½ percent of the $2.5 trillion global market for exchange-traded funds.

These types of funds are financially engineered with "leverage" from derivatives and debt. They can supercharge the returns of their underlying benchmarks. But they can also amplify the losses.

ETFs track the performance of an index, like the , but trade like stocks.

Watch the above video for a detailed explanation on how leveraged ETFs work and the risks they could pose.

Fink warning on leveraged ETFs

Larry Fink
Adam Jeffery | CNBC

BlackRock Chairman and CEO Larry Fink—who runs the world's largest asset manager and ETF provider—recently said structural problems with leveraged ETFs have the potential to "blow up the whole industry one day."

Sponsors of leveraged ETFs and related products called his remarks an exaggeration.

Read MoreDon't get out of stocks yet, BlackRock's Fink says

In comments at a Deutsche Bank conference in New York last month, Fink also raised questions about whether too many risky financial products are entering the marketplace.

—CNBC's Matthew J. Belvedere. Reuters contributed to this report.