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9 Leveraged ETFs That More Than Doubled in 2019

Sweta Killa

Wall Street has witnessed a spectacular run this year, braving all the woes including recession fears, geopolitical tensions, U.S.-Sino trade spat and talks of Trump’s impeachment. All the three major indices have hit record highs, with the Dow Jones and the S&P 500 gaining 22% and 28.5%, respectively, while the Nasdaq Composite climbing 36%.

In fact, U.S. stocks are poised for their best annual performance in six years mainly powered by trade optimism and a dovish Fed. Trade fears abated after the phase one deal was agreed upon by the world’s two largest powers. Lower interest rates will keep borrowing costs down, thereby resulting in higher consumer spending and an upswing in economic activities. A technology surge, improving economic outlook and better-than-expected earnings added to the strength (read: 4 Big ETF Stories of 2019 That Will Continue in 2020).

All these fundamentals have led to huge demand for leveraged ETFs as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (i.e. 2x or 3x) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains positive.

Below we highlighted nine leveraged equity ETFs that piled up more than 100% returns in 2019. These funds will continue to be investors’ darlings provided the sentiments remain bullish.

Direxion Daily Semiconductor Bull 3x Shares SOXL — Up 229.6%

This ETF targets the semiconductor corner of the technology sector with 3x leveraged exposure to the PHLX Semiconductor Sector Index. It has amassed about $795.1 million in its asset base while charging 94 bps in fees per year. Volume is good as it exchanges 853,000 shares per day, on average (read: Semiconductor Outperforms in 2019: 5 Best ETFs & Stocks).

Direxion Daily Technology Bull 3x Shares TECL — Up 183.5%

This ETF targets the broad technology sector with three times exposure to the Technology Select Sector Index. It has amassed about $1.1 billion in its asset base and charges 95 bps in fees per year. Volume is good as it exchanges around 273,000 shares a day, on average.

Direxion Daily Homebuilders & Supplies Bull 3X Shares NAIL — Up 183.3%

NAIL provides leveraged exposure to homebuilders and creates a three-time long position on the Dow Jones U.S. Select Home Construction Index. It charges an annual fee of 95 bps and trades in a lower average daily volume of about 63,000 shares. The fund has accumulated $58.2 million in its asset base (read: 5 Best Stocks in the Hot Homebuilding ETF).

ProShares UltraPro QQQ TQQQ    – Up 132.5%

This ETF provides three times the returns of the daily performance of the Nasdaq-100 Index. It is one of the popular and liquid options in the leveraged large-cap space with AUM of $4.4 billion and average daily volume of 16.8 million shares. TQQQ charges 95 bps in fees per year.

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN FNGU – Up 115.4%

This note seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 bps in annual fees. The ETN has accumulated $198 million in its asset base and trades in average daily volume of 121,000 shares.

Direxion Daily Financial Bull 3x Shares FAS – Up 110.9%

This ETF provides three times exposure to the performance of the Russell 1000 Financial Services Index. The fund has amassed nearly $1.5 billion in its asset base and charges 95 bps in annual fees. It trades in average daily volume of nearly 620,000 shares (read: Why Financials ETFs Are On Fire).

ProShares Ultra Semiconductors USD – Up 108.2%

This fund offers two times the daily performance of the Dow Jones U.S. Semiconductors Index, charging investors 95 bps in annual fees. It has AUM of $98.1 million and trades in average daily volume of 33,000 shares.

Direxion Daily Gold Miners Bull 3X Shares NUGT — Up 104%

NUGT provides three times exposure to the daily performance of the NYSE Arca Gold Miners Index. It charges 91 bps in annual fees and has gathered $1.6 billion in its asset base. Volume is heavy with around 10.5 million shares exchanged per day, on average (read: Gold to Shine in 2020: ETFs to Consider).

Direxion Daily S&P 500 Bull 3x Shares SPXL – Up 101.2%

This fund creates three times long position on the S&P 500 Index with expense ratio of 0.95%. It has AUM of $1.1 billion and is liquid with average daily volume of nearly 3.6 million shares.

Bottom Line

While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in the fluctuating or seesawing markets. Further, the ETFs’ performance could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).

Still, for ETF investors who are bullish on U.S. equities for the near term, any of the above products could make an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the “trend is the friend” in this corner of the investing world.

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