8 Best Leveraged ETFs Of 2023 (2023)

The Best Leveraged ETFs of February 2023

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Best Leveraged ETF for Small-Cap Stocks

Direxion Daily Small Cap Bull 3x ETF (TNA)

8 Best Leveraged ETFs Of 2023 (1)

Average 3-Month Volume

11.9 million Shares

Leverage

3x

Expense Ratio

1.05%

8 Best Leveraged ETFs Of 2023 (2)

Average 3-Month Volume

11.9 million Shares

Leverage

3x

Expense Ratio

1.05%

Why We Picked It

The Direxion Daily Small Cap Bull 3x ETF offers traders with a short-term bullish outlook on small-cap stocks the opportunity to amplify daily returns by a multiple of three. Decent average trading volumes ensure ample liquidity for trading volatile markets.

TNA carries considerable risk and is only suitable for experienced investors who actively manage positions on a daily basis.

(Video) Best Leveraged ETFs Now! TQQQ, QQQ, FAS, XLF, NRGU, GUSH, VDE, CURE, IWM, TNA, DFEN, YANG

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Best Leveraged ETF for the S&P 500

Direxion Daily S&P 500 Bull 3x ETF (SPXL)

8 Best Leveraged ETFs Of 2023 (3)

Average 3-Month Volume

14.9 million Shares

Leverage

3x

Expense Ratio

0.97%

8 Best Leveraged ETFs Of 2023 (4)

Average 3-Month Volume

14.9 million Shares

Leverage

3x

Expense Ratio

0.97%

Why We Picked It

With an AUM of $2.5 billion and an average three-month trading volume of just more than 9.3 million shares, Direxion’s Daily S&P 500 Bull 3x ETF is another popular option for short-term bullish traders.

SPXL is structured to yield three times the S&P 500’s daily return. It’s similar to UPRO, although four basis points more expensive. Increased volatility offers opportunity but also demands close monitoring.

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Best Leveraged ETF for Financial Stocks

Direxion Daily Financial Bull 3x ETF (FAS)

8 Best Leveraged ETFs Of 2023 (5)

Average 3-Month Volume

1.6 million Shares

Leverage

3x

Expense Ratio

0.92%

8 Best Leveraged ETFs Of 2023 (6)

Average 3-Month Volume

1.6 million Shares

Leverage

3x

Expense Ratio

0.92%

Why We Picked It

Direxion’s Daily Financial Bull 3x ETF tracks the S&P Dow Jones Financial Select Sector TR Index. FAS lets investors with a short-term bullish view on financial stocks amplify the daily returns of the index by three.

As with any leveraged ETF, the product is suitable only for experienced investors trading for the short-term who are aware of the risks of investing in leveraged instruments. With average trading volumes of 1.3 billion shares, FAS offers an attractive level of liquidity for a leveraged sector fund, allowing traders to move in and out of positions in evolving market conditions.

(Video) A deeper look at leveraged ETFs

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Best Leveraged ETF for Tech Stocks

Direxion Daily Tech Bull 3x ETF (TECL)

8 Best Leveraged ETFs Of 2023 (7)

Average 3-Month Volume

4.9 million shares

Leverage

3x

Expense Ratio

0.94%

8 Best Leveraged ETFs Of 2023 (8)

Average 3-Month Volume

4.9 million shares

Leverage

3x

Expense Ratio

0.94%

(Video) 3x Leveraged ETFs : What They DON'T Want You To Know

Why We Picked It

The Direxion Daily Tech Bull 3x ETF is designed for investors with a bullish short-term view of tech stocks. The fund’s objective is to achieve three times the daily return of the Technology Select Sector Index.

TECL is one of the most popular tech-oriented leveraged ETFs, with an AUM of $1.7 billion. Its average trading volume makes it a very liquid option for rapidly evolving markets. The fund is suited to sophisticated investors who trade on an intraday basis.

Methodology

Leveraged ETFs are intended for extremely short-term, intraday trading. The best funds should be highly liquid, letting investors quickly move in and out of positions in volatile markets. This makes high trading volume one of the most significant factors in identifying the best leveraged ETFs.

Our screen sought to identify funds with the highest average trading volumes in their class. Many of the ETFs we chose sought to track broad market indexes like the S&P 500 and the Nasdaq 100.

Beyond trading volumes, we focused on funds that delivered 3x returns and charged competitive expense ratio fees of less than 1% (with one exception). Longer-term performance is much less relevant, since leveraged ETFs are designed for short-term trading rather than ”buy and hold” strategies.

Since leveraged ETFs seek daily returns and leverage is reset when the next day’s net asset value (NAV) is calculated, the fund’s performance can vary widely from the benchmark’s over longer periods due to compounding effects.

What Are Leveraged ETFs?

Leveraged ETFs are exchange-traded funds aiming to amplify an underlying index’s daily returns.

(Video) Leveraged ETF Myths and Methods That Beat the Stock Market

Whereas a conventional exchange-traded fund like the SPDR S&P 500 ETF aims to duplicate the performance of the S&P 500 index over the long term, the ProShares UltraPro S&P 500 ETF attempts to deliver three times the daily return of the index during a single session.

Leveraged ETFs reset their gains and losses each day, which compounds the fund’s gains and losses over the long term. The funds are basically marked to market every night, starting out the next day with a clean slate as if the returns of the prior session had not existed.

For this reason, investing professionals do not recommend that anyone hold leveraged ETFs over periods of time longer than a single session.

How Do Leveraged ETFs Work?

Let’s say an investor purchases shares of a 3 times leveraged ETF for $100. If the underlying index rises 10% in a single session, the investor gains 30%, boosting the investment to $130.

The leveraged ETF resets for the next session. If the underlying index drops 5% the following day, the value of the position declines 15% to $110.50.

As markets and stock indexes rise and fall over time, longer-term positions in leveraged ETFs can become very challenging to follow, thanks to amplified gains and losses.

Who Should Invest in Leveraged ETFs

Leveraged ETFs are best for experienced investors with a clear understanding of the risks involved and how leverage works.

These ETFs offer an opportunity to add considerable value to your overall investment strategy for traders with significant experience, an appetite for risk and the desire to amplify daily returns in both up and down markets.

In addition to offering a way to augment daily returns, particularly during periods of market volatility, leveraged ETFs can also be effectively used for hedging purposes. If enhanced returns and, or hedging strategies are your objective, leveraged ETFs can open up new opportunities.

Remember to do your research and approach leveraged funds with caution, as losses can be magnified similarly to returns.

What Is an Inverse Leveraged ETF?

An inverse leveraged ETF aims to provide investors a multiple of the opposite of a benchmark’s performance through the use of derivative instruments like swaps and futures contracts.

For example, a 2x inverse leveraged ETF would provide double the opposite returns of its benchmark index. If the benchmark was the S&P 500 and the index fell 10%, the inverse leveraged ETF should gain 20%. But by the same token, if the S&P were to gain 10%, the inverse leveraged ETF should lose 20% over the same time period.

The key idea in that example is “should,” because the returns on inverse ETFs can differ from the inverse of the underlying index, especially over longer periods of time.

According to the SEC, between December 1, 2008, and April 30, 2009, a particular benchmark index gained 2%. However, a leveraged ETF seeking to deliver twice that index’s daily return fell by 6%—and an inverse ETF seeking to deliver twice the inverse of the index’s daily return fell by 25%.

To mitigate this sort of outcome, many inverse leveraged ETFs reset their returns daily.

Inverse ETF Frequently Asked Questions (FAQs)

How should I choose a leveraged ETF?

Before choosing a leveraged ETF, make sure you understand its investment objectives and strategy, as well as any risks and costs associated with the ETF. This information can be found in the fund prospectus.

Always consult a financial professional before investing in any complex investment products such as leveraged ETFs.

How long should you hold a leveraged ETF?

You should aim to hold a leveraged ETF for the period stated to achieve its objective returns. For example, holding a monthly leveraged ETF for more or less than a month may cause your overall returns to deviate from the stated objective since it is difficult for leveraged ETFs to provide the promised degree of returns outside of their designed period.

Can you momentum trade a leveraged ETF?

You can use leveraged ETFs for momentum trading, but it requires a skilled hand to do so successfully. Some studies suggest moment trading with leveraged funds is only profitable in rising markets.

If you do attempt a moment strategy with leveraged ETFs, remember that leverage can work for you and against you. This means your risks are as amplified as well as your potential returns.

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(Video) I JUST LOADED UP $14,000 ON THIS TRIPLE LEVERAGED ETF - THIS IS SUPER HIGH RISK! TESLA STOCK PRICE!

FAQs

Are 3x ETF good for long term investments? ›

The idea behind 3x ETFs is to take advantage of quick day-to-day movements in financial markets. In the long term, new risks arise. Because of how leveraged ETFs are constructed, they are only intended for very short holding periods, such as intraday.

What is the fastest growing ETF? ›

Fastest Growing ETFs of 2023 (Starting AUM >$0)
TickerFundInflows (%)
NVDSAXS 1.25X NVDA Bear Daily ETF610%
BKHYBNY Mellon High Yield Beta ETF552%
QTJAInnovator Growth Accelerated Plus ETF - January540%
FSIGFirst Trust Limited Duration Investment Grade Corporate ETF488%
16 more rows
6 days ago

What are the best performing ETFs over the last 5 years? ›

100 Highest 5 Year ETF Returns
SymbolName5-Year Return
XSDSPDR S&P Semiconductor ETF191.91%
QCLNFirst Trust NASDAQ Clean Edge Green Energy Index Fund176.69%
SMHVanEck Semiconductor ETF144.16%
SOXXiShares Semiconductor ETF140.42%
90 more rows

Are there any 4x leveraged ETFs? ›

No. Looks like there are no active ETFs available for the given 4x Leveraged category. It is possible that the earlier available ETFs of 4x Leveraged category may have been delisted, closed or suspended from active trading, or FKnol may not have all the ETFs of 4x Leveraged category in their records.

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.

Can 3x ETF go to zero? ›

Yes, although most would liquidate before they got there, paying shareholders off at some non-zero price. For example, suppose a 3x levered ETF is initially offered at $100/share. Even if the underlying declined by more than 33%, the ETF price would not be zero, because it rebalances daily.

How long should I hold TQQQ? ›

Back tests show that TQQQ can be held longer term (1-Year) and beats QQQ but holding for too long (5 Years) can significantly worsen performance. Holding TQQQ for too long almost guarantees that you will encounter a protracted bear market that wipes out nearly your entire portfolio.

Is QQQ or TQQQ better for long term investment? ›

In general, QQQ is appropriate for investors who want a large-cap growth stock ETF that can potentially outperform the S&P 500 in the long run. TQQQ is appropriate for investors with a high tolerance for risk and for short-term investment periods.

What are the top 5 ETFs to buy? ›

Top seven ETFs to buy now
ETFTickerNet Assets
Vanguard 500 Index Fund(NYSEMKT:VOO)$744.8 billion
Invesco QQQ Trust(NASDAQ:QQQ)$145.9 billion
Vanguard Growth Fund(NYSEMKT:VUG)$132.3 billion
Avantis Small-Cap U.S. Value ETF(NYSEMKT:AVUV)$4.72 billion
3 more rows
Jan 27, 2023

Which ETF has the best 10 year return? ›

Best Performing ETFs of Last 10 Years: U. S. Equity

Over the past ten years, the U. S. stock market has been most favorable for large-cap growth investments. The large-cap growth-styled Invesco QQQ Trust ETF (QQQ), with an annualized return of 17.0%, is the best-performing ETF in the U. S. equity category.

What is the hottest ETF sector? ›

Equity Energy
  • #1. SPDR® S&P Oil & Gas Equipment&Svcs ETF XES.
  • #2. Vanguard Energy ETF VDE.
  • #3. SPDR® Kensho Clean Power ETF CNRG.

Which ETF is best for long term investment? ›

1) Motilal Oswal NASDAQ 100 ETF

This ETF is the best ETF to invest in India.

What stock has the highest return in 5 years? ›

Highest returns in 5 year
S.No.NameCMP Rs.
1.Best Agrolife1126.55
2.National Standar4825.95
3.Raj Rayon Inds.84.65
4.Authum Invest204.85
19 more rows

Can ETFs make you rich fast? ›

ETFs don't deliver get-rich-quick results. So it's important to start investing early and then use a buy-and-hold strategy, giving your money plenty of time to compound.

Is Sqqq 3x leveraged? ›

The SQQQ is an extremely aggressive 3x leveraged ETF that seeks to allow investors to benefit from short term declines in the Nasdaq 100. The fund uses swaps on the NASDAQ-100 ETF (QQQ), swaps on the index itself, and futures to create the inverse exposure to the underlying market.

Why should you not hold leveraged ETFs? ›

If you take away only one thing from this article, it's this: Leveraged ETFs are designed to track the daily performance of their index. They are short term trading instruments. If you hold them for the long term, you are literally leaving returns behind.

Can leveraged ETFs fail? ›

Despite some major successes, Leveraged ETFs (LETFs) have had some notable failures. These failures are the result of a phenomenon known as volatility drag (also known as volatility decay), the fact that LETFs tend to underperform in the presence of volatility.

What is the best 3x leveraged ETF? ›

  • The Best Leveraged ETFs of March 2023.
  • ProShares UltraPro QQQ (TQQQ)
  • ProShares UltraPro Short QQQ (SQQQ)
  • ProShares Ultra VIX Short-Term Futures ETF (UVXY)
  • ProShares UltraPro S&P 500 ETF (UPRO)
  • Direxion Daily Small Cap Bull 3x ETF (TNA)
  • Direxion Daily S&P 500 Bull 3x ETF (SPXL)
  • Direxion Daily Financial Bull 3x ETF (FAS)
5 days ago

Are leveraged ETFs good for long term? ›

Leveraged ETFs are Not Built for Long-Term Investments

If you go back and simulate how zero-tracking error 2x and 3x S&P 500 ETFs would have performed since 1950, it turns out that while the index gained 7.7% annualized, the 2x ETF would have gained 13.2% annualized, and the 3x ETF 16.1% annualized.

Is there a 3x QQQ? ›

The TQQQ is a 3x leveraged ETF based on the QQQ (a Nasdaq-100 Index ETF). Because it is leveraged, it uses derivatives contracts to amplify its returns based on how the index performs.

Why TQQQ is not good for long term? ›

The daily resetting of leveraged ETFs means the fund only provides the return multiple relative to the underlying index on a daily basis, not necessarily over the long term. Because of this, volatility of the index can eat away at gains; this is known as volatility decay or beta slippage.

Can you lose more than you invest in leveraged ETFs? ›

Leveraged ETFs amplify daily returns and can help traders generate outsized returns and hedge against potential losses. A leveraged ETF's amplified daily returns can trigger steep losses in short periods of time, and a leveraged ETF can lose most or all of its value.

What was the average return of TQQQ last 10 years? ›

✔️Accepted answer: The ten year TQQQ average annual return has been 34.18% with dividends reinvested.

Is TQQQ ETF a better long-term or short-term investment? ›

Summary. TQQQ's 258% return over a single 12-month period makes clear why it appeals to long-term investors though it was designed to be used only by day traders.

What is the average return of TQQQ? ›

Quarter-End Average Annual Total Returns As of 12/31/2022
AverageNAV ReturnMarket Return
1 Year-79.03-46.82%
3 Year-7.07-5.28%
5 Year+8.57+6.73%
10 Year+32.10+28.77%
2 more rows

Does TQQQ rebalance daily? ›

Daily Rebalancing

Leverage drift (or 3x multiple drift) is the natural tendency of TQQQ to move away from its 3x multiple as markets move. 3x multiple drift arises naturally when equity prices change while the level of synthetic gearing remains relatively constant.

What is QQQ biggest holding? ›

Top 10 Holdings
CompanySymbolTotal Net Assets
Apple Inc.AAPL11.80%
Microsoft Corp.MSFT11.76%
Amazon.com Inc.AMZN6.72%
NVIDIA Corp.NVDA3.99%
6 more rows

Why should I buy TQQQ? ›

SQQQ is ideal for very short-term short bets against the Nasdaq 100 index. Overall, SQQQ best serves as a very specific and small satellite holding in an aggressive investor's portfolio.

What is comparable to TQQQ? ›

ETF Benchmarks & Alternatives
TickerName5Y Return
NDQInvesco QQQ Trust, Series 1104.72%
SQQQProShares UltraPro Short QQQ-97.57%
QIDProShares UltraShort QQQ-87.98%
03OIProShares Trust - ProShares UltraPro QQQ-63.83%
4 more rows

Is QQQ 3X leveraged? ›

The TQQQ is a 3x leveraged ETF based on the QQQ (a Nasdaq-100 Index ETF). Because it is leveraged, it uses derivatives contracts to amplify its returns based on how the index performs.

What are 3X leveraged ETFs? ›

Leveraged 3X ETFs are funds that track a wide variety of asset classes, such as stocks, bonds and commodity futures, and apply leverage in order to gain three times the daily or monthly return of the respective underlying index. Such ETFs come in the long and short varieties.

Is there a triple leveraged S&P 500 ETF? ›

The 3× leveraged S&P 500 ETF with the lowest fees is UPRO and SPXL had the highest liquidity. The one-year total return of the S&P 500 Index is -14.4%, as of Nov. 18, 2022. But investors should remember that these ETFs are not designed to mimic long-term returns.

What is the maximum leverage available? ›

Maximum leverage is the largest position size permitted in a leveraged account based on a customer's margin requirements with their broker. Stock investors are allowed to borrow up to 50% of the value of a position under Reg T, but some brokerage firms may impose more stringent requirements.

Why buy QQQ instead of TQQQ? ›

In general, QQQ is appropriate for investors who want a large-cap growth stock ETF that can potentially outperform the S&P 500 in the long run. TQQQ is appropriate for investors with a high tolerance for risk and for short-term investment periods.

Is TQQQ good for long term? ›

Summary. TQQQ's 258% return over a single 12-month period makes clear why it appeals to long-term investors though it was designed to be used only by day traders.

Can you hold 2x leveraged ETF long term? ›

If you take away only one thing from this article, it's this: Leveraged ETFs are designed to track the daily performance of their index. They are short term trading instruments. If you hold them for the long term, you are literally leaving returns behind.

Does Tqqq have decay? ›

3X ETFs such as TQQQs have much higher decay, and the loss from time-decay is significant in both the bear and bull markets. Therefore TQQQ is not a desirable vehicle for long-term holding.

What ETF consistently beats the S&P 500? ›

Notably, the Schwab U.S. Dividend Equity ETF (SCHD) is the only value-styled ETF to beat ETFs tracking the S&P 500.

Why did Vanguard stop leveraged ETFs? ›

We're making this change because these products and services do not align with our investors' focus on the long term. Most of these investments are designed to deliver their stated returns for only a short period (for example, 1 day or 1 month).

What is the most profitable leverage? ›

The best leverage in forex markets depends on the investor. For conservative investors, or new ones, a low leverage ratio of 5:1/10:1 may be good. For seasoned investors, who are more risk-friendly, leverages may be as high as 50:1 or even 100:1 plus.

What leverage do most traders use? ›

Leverage in Forex Trading

In the foreign exchange markets, leverage is commonly as high as 100:1. This means that for every $1,000 in your account, you can trade up to $100,000 in value. Many traders believe the reason that forex market makers offer such high leverage is that leverage is a function of risk.

What is a healthy amount of leverage? ›

A figure of 0.5 or less is ideal. In other words, no more than half of the company's assets should be financed by debt. In reality, many investors tolerate significantly higher ratios.

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