"Enhancing Decision-Making Through Critical Thinking and Leveraged ETFs"

Alessio Frateily

Hatched by Alessio Frateily

Dec 04, 2023

4 min read


"Enhancing Decision-Making Through Critical Thinking and Leveraged ETFs"


Critical thinking is a valuable skill that enables individuals to evaluate arguments and ideas through rational reasoning. By applying frameworks such as Paul-Elder's Critical Thinking Framework, designers, design students, researchers, and even investors can eliminate biases and distractions that hinder effective decision-making. This article explores the elements of reasoning within the framework and how they can be applied to enhance critical thinking. Additionally, we will delve into the concept of leveraged ETFs and their potential benefits and risks when it comes to investment strategies.

Understanding the Paul-Elder Critical Thinking Framework:

The Paul-Elder Critical Thinking Framework comprises eight elements of reasoning: purpose, attempt, assumption, point of view, data and evidence, concepts and ideas, inferences and interpretations, and implications and consequences. These elements provide a systematic approach to analyzing arguments and ideas. By applying the nine benchmarks of clarity, accuracy, precision, relevance, depth, breadth, logic, significance, and fairness, individuals can evaluate the strength and validity of their reasoning.

Applying Critical Thinking in Design and Decision-Making:

In the context of design, critical thinking plays a crucial role in problem-solving. The framework's three main stages - observation, questioning, and solution formulation - guide designers in building rational knowledge, analyzing and evaluating data, and synthesizing actionable plans. By incorporating these stages into the decision-making process, designers can make informed choices and achieve innovative outcomes.

The Role of Elements of Reasoning, Intellectual Standards, and Intellectual Traits:

Within the Paul-Elder Critical Thinking Framework, three main elements contribute to improving reasoning: elements of reasoning, intellectual standards, and intellectual traits. The elements of reasoning, including purpose, attempt, assumption, point of view, data and evidence, and concepts and ideas, help structure and analyze arguments effectively. Intellectual standards, such as clarity, accuracy, precision, relevance, depth, breadth, logic, significance, and fairness, serve as benchmarks for evaluating the quality of reasoning. Lastly, intellectual traits encompass the personal characteristics that facilitate critical thinking, such as open-mindedness and intellectual humility.

Leveraged ETFs: Benefits and Risks:

Leveraged ETFs, such as the 3x leveraged ETF UPRO, offer the potential for higher returns but also come with increased volatility and risk. These ETFs aim to generate returns that magnify the daily performance of an underlying index, like the S&P 500. By simulating the prices and analyzing historical data, it becomes evident that leveraged ETFs exhibit significantly higher volatility and returns compared to their unleveraged counterparts.

The Concept of Dollar Cost Averaging (DCA):

Dollar Cost Averaging (DCA) is an investment strategy that involves regularly investing fixed amounts of money into an asset, regardless of its price fluctuations. When applied to leveraged ETFs, DCA can help mitigate the risks associated with high leverage. However, it is important to consider the potential drawbacks and limitations of DCA, such as missing out on potential buying opportunities during market downturns.

Connecting Critical Thinking and Leveraged ETFs:

The application of critical thinking in the context of leveraged ETFs can help investors make informed decisions. By critically evaluating the purpose, assumptions, and data surrounding leveraged ETFs, investors can assess their suitability based on their risk tolerance and investment goals. Additionally, critical thinking can aid in determining the optimal leverage level and evaluating the potential benefits and risks associated with leveraged ETFs.

Actionable Advice:

  • 1. Establish a clear purpose: Before making any investment decisions, clearly define your financial goals and risk tolerance. This will help guide your critical thinking process and ensure alignment with your objectives.
  • 2. Conduct thorough research: Invest time and effort in understanding the mechanics, historical performance, and risks associated with leveraged ETFs. Gather relevant data and evidence to inform your decision-making process.
  • 3. Seek different perspectives: Engage with financial experts, advisors, and fellow investors to gain diverse viewpoints on leveraged ETFs. This will broaden your understanding and challenge your assumptions, leading to more comprehensive critical thinking.


Critical thinking, when applied using frameworks such as Paul-Elder's Critical Thinking Framework, enables individuals to make more informed decisions by evaluating arguments and ideas through rational reasoning. By incorporating critical thinking into the evaluation of leveraged ETFs, investors can navigate potential risks and capitalize on potential benefits. However, it is essential to approach leveraged ETFs with caution and conduct thorough research to ensure alignment with individual investment goals and risk tolerance. Through clear purpose setting, comprehensive research, and seeking diverse perspectives, investors can enhance their critical thinking and make more well-rounded decisions in the dynamic world of finance.

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