Leveraged ETFs promise big rewards, but the risk may outweigh them. If you're looking to include leveraged ETFs in your investment portfolio, it's a good idea to approach them with caution.
Best-performing leveraged ETFs
Here are some of the best-performing leveraged equity ETFs. Note, as with any investment, those performing well today may not be performing well tomorrow.
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| ProShares Ultra Semiconductors | |
| MicroSectors FANG+™ Index 3X Leveraged ETN | |
| MicroSectors FANG+ Index 2X Leveraged ETNs | |
| Direxion Daily Technology Bull 3X Shares | |
| Direxion Daily Semiconductor Bull 3x Shares | |
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| ProShares Ultra Technology | |
Source: VettaFi. Data is current as of April 2, 2024. Data is intended for informational purposes only.
Leveraged ETF definition
A leveraged ETF is an exchange-traded fund that tracks an existing index, but rather than match that index’s returns, it aims to increase them by two or three times.
» Looking for general ETF data? Check out a list of the best ETFs in terms of performance.
For example, say you had a traditional ETF that tracked the S&P 500 index. If the S&P 500 increased in value by 1%, your ETF would likely also increase by about 1% because it holds most of the same companies the index tracks.
But if you had a leveraged S&P 500 ETF, that 1% gain could be magnified and instead be a 2% or 3% gain. While that’s great if the market is going up, it’s not so great if the market is going down. If the S&P 500 lost 1%, you could lose 2% or 3%.
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How do leveraged ETFs work?
So, how do leveraged ETFs achieve those impressive returns (or magnified losses)? Leveraged ETFs borrow money — typically from a bank or investment firm — and invest that money into contract investments, such as futures or options. These types of investments are highly speculative and can pay out big. But they can also lose big.
If the leveraged ETF you’re investing in is using a high-risk strategy, it’s possible that your losses could exceed the amount you invested.
By contrast, if you invest in a traditional ETF, you won’t lose more than the amount you invested — and losing that entire investment is relatively rare with traditional ETFs.
Leveraged ETFs are very risky and should be approached with caution.
Leveraged ETF expenses
Leveraged ETFs tend to have much more expensive fees than traditional ETFs. Leveraged ETF expense ratios can float around 0.95%. That’s a high price tag compared to most passive ETFs, which can have expense ratios as low as 0.10% or 0.20%.
Leveraged ETFs may also charge interest and transaction fees, which can reduce your overall return.
Learn more
Neither the author nor editor held positions in the aforementioned investments at the time of publication.
FAQs
Leveraged ETF prices tend to decay over time, and triple leverage will tend to decay at a faster rate than 2x leverage. As a result, they can tend toward zero.
What are the best ETFs for April 2024? ›
The 10 Best ETFs of April 2024
Fund Name | Expense Ratio |
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Vanguard Total International Stock ETF (VXUS) | 0.07% |
Schwab U.S. Dividend Equity ETF (SCHD) | 0.06% |
Invesco S&P 500 GARP ETF (SPGP) | 0.34% |
Schwab Fundamental International Large Company Index ETF (FNDF) | 0.25% |
6 more rowsApr 8, 2024
Which is better 3X or 2X leveraged ETF? ›
Leveraged ETF prices tend to decay over time, and triple leverage will tend to decay at a faster rate than 2x leverage. As a result, they can tend toward zero.
What is the most popular leveraged ETF? ›
ProShares UltraPro QQQ is the most popular and liquid ETF in the leveraged space, with AUM of $21.9 billion and an average daily volume of 67.3 million shares a day. The fund seeks to deliver three times the return of the daily performance of the NASDAQ-100 Index, charging investors 0.88% in annual fees.
Are there 5x leveraged ETFs? ›
Longtime ETF analyst Todd Sohn of Strategas Securities said the Leverage Shares 5x Long Magnificent Seven ETP UK:MAG7 appears to be the most heavily levered product available to trade in any developed market, although a seven-times levered index on oil and gas futures exists in Europe.
What are the best ETFs to buy in 2024? ›
Best ETFs as of April 2024
Ticker | Fund name | 5-year return |
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SOXX | iShares Semiconductor ETF | 30.70% |
XLK | Technology Select Sector SPDR Fund | 24.57% |
IYW | iShares U.S. Technology ETF | 24.09% |
FTEC | Fidelity MSCI Information Technology Index ETF | 22.79% |
1 more rowMar 29, 2024
Which ETF has the best 10 year return? ›
The best-performing ETF in the last 10 years was VanEck Semiconductor ETF (SMH).
Can Tqqq go to zero? ›
"They all go to 0 over time." "If you hold them for more than a few days, you will lose money." The 3x Long Nasdaq 100 ETF (TQQQ) was launched in February 2010, over 8 years ago. Since its inception, it has advanced 4,357%, versus a gain of 378% for the unleveraged Nasdaq 100 ETF (QQQ).
How long should I hold leveraged ETFs? ›
These investors may not understand that a 200% or 300% leveraged ETF doubles or triples the underlying index returns only over very short holding periods and that these leveraged ETFs are likely to return substantially less than double or triple the underlying index returns over holding periods longer than a few days ...
Can 2x leveraged ETF go to zero? ›
Because they rebalance daily, leveraged ETFs usually never lose all of their value. They can, however, fall toward zero over time. If a leveraged ETF approaches zero, its manager typically liquidates its assets and pays out all remaining holders in cash.
Leveraged ETFs decay due to the compounding effect of daily returns, volatility of the market and the cost of leverage. The volatility drag of leveraged ETFs means that losses in the ETF can be magnified over time and they are not suitable for long-term investments.
What is the most volatile 3x ETF? ›
The Direxion Daily Junior Gold Miners Index Bull 3x Shares (JNUG) and the Direxion Daily Junior Gold Miners Index Bear 3x Shares (JDST) are the two most volatile exchange-traded funds of all. Each has a one-year volatility reading of about 170.
What is the biggest risk of leveraged ETF? ›
The two major risks associated with leveraged ETFs are decay and high volatility. High volatility translates to high risk. Decay emanates from holding the ETFs for long periods.
Is there a 4x leveraged ETF? ›
BMO has launched the first quadruple leveraged ETN fund that tracks the S&P 500. The fund will trade under the ticker symbol "XXXX" and seeks to generate four time the S&P 500's return on a daily basis. The launch come as bullishness rise among investors and Wall Street predicts more gains to come in 2024.
What is the oldest 3x leveraged ETF? ›
Direxion launched its first leveraged ETFs in 2008. In November 2008 the company was the first to offer ETFs with 3X leverage, a move that was copied some months later by its competitors ProShares and Rydex Investments.
Should I hold leveraged ETFs? ›
Nearly all leveraged ETFs come with a prominent warning in their prospectus: they are not designed for long-term holding. The combination of leverage, market volatility, and an unfavorable sequence of returns can lead to disastrous outcomes.
What's the best ETF to buy right now? ›
The best ETFs to buy now
Exchange-traded fund (ticker) | Assets under management | Expenses |
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Vanguard Dividend Appreciation ETF (VIG) | $78.2 billion | 0.06% |
Vanguard U.S. Quality Factor ETF (VFQY) | $324.3 million | 0.13% |
SPDR Gold MiniShares (GLDM) | $6.8 billion | 0.10% |
iShares 1-3 Year Treasury Bond ETF (SHY) | $24.8 billion | 0.15% |
1 more row
What stocks to invest in in 2024? ›
10 Best Growth Stocks to Buy for 2024
Stock | Implied upside from April 25 close* |
---|
Tesla Inc. (TSLA) | 23.4% |
Mastercard Inc. (MA) | 19% |
Salesforce Inc. (CRM) | 20.8% |
Advanced Micro Devices Inc. (AMD) | 30.1% |
6 more rows2 days ago
What is the best performing ETF in last 5 years? ›
100 Highest 5 Year ETF Returns
Symbol | Name | 5-Year Return |
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GBTC | Grayscale Bitcoin Trust | 53.36% |
USD | ProShares Ultra Semiconductors | 45.47% |
FNGO | MicroSectors FANG+ Index 2X Leveraged ETNs | 41.28% |
FNGU | MicroSectors FANG+™ Index 3X Leveraged ETN | 40.97% |
93 more rows
Which ETF gives the highest return? ›
9 Best-Performing ETFs of 2024
- Simplify Interest Rate Hedge ETF (PFIX)
- VanEck Semiconductor ETF (SMH)
- Amplify U.S. Alternative Harvest ETF (MJUS)
- AdvisorShares Pure U.S. Cannabis ETF (MSOS)
- YieldMax NVDA Option Income Strategy ETF (NVDY)
- ProShares Bitcoin Strategy ETF (BITO)
- Grayscale Bitcoin Trust (GBTC)