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Best Leveraged ETFs of First Half of 2017

Sanghamitra Saha

With the first half of 2017 drawing to a close, it is time to look back at what worked in the investment world. Leveraged ETFs sure deserve a mention here given how copiously they give returns to investors (read: Trump Slump to Oil Slide: Top ETF Stories of First-Half 2017).

The period took dramatic turns from the Trump rally on hopes of fiscal reflation to uncertainty over his policy uncertainty, oil price relief to oil price slump and finally the emergence of international economies.

On a year-to-date basis (as of June 29, 2017), the S&P 500-based ETF SPY has gained about 9%, the Dow Jones-based ETF DIA has advanced 8.9% while the Nasdaq 100-based QQQ has rallied around 16.7%. Needless to say, such stellar gains have had a significant impact on the leveraged ETFs.

These ETFs provide multiple times exposure to the performance of the underlying index. These funds employ various investment strategies such as use of swaps, futures contracts and other derivative instruments to accomplish their objectives.

Since most of these ETFs seek to attain their goals on a daily basis, their performance could vary significantly over a longer period when compared to the short period due to their compounding effect.

Still, the space remains a hot area for investors looking for high returns in a short time. They must be interested to know about the top-leveraged ETF performers of the first half of 2017.

A Glance at the Toppers

Direxion Daily S&P Biotech Bull 3X ETF LABU – Up 109.8% YTD

This segment also caught investors’ attention in the first half. Easing outrage against the price gouging issue, President Trump’s pledges to reduce FDA regulations and remove taxes and fees on pharmaceutical and medical-device manufacturers favored the space (read: Forget Big Tech, Biotech ETFs are Soaring Higher).

This has led to 109.8% gains for LABU so far this year (as of June 29, 2017). The fund looks to offer three times the performance of the S&P Biotechnology Select Industry Index.

Direxion Daily South Korea Bull 3X ETF KORU – Up 88.9% YTD

South Korea underwent a presidential election in the first half. Moon Jae-In, who was elected on May 9, 2017, announced an 11.2 trillion won(about $10 billion) fiscal stimulus package in early June. The government estimates that “the extra spending will boost economic growth by 0.2 percentage point this year, which may raise its 2017 outlook from current 2.6%” (read: South Korea ETFs in Focus on $10 Billion Stimulus).

Plus, the ripple effect of the tech rally boosted the fund in the first half. The fund offers 300% of the performance of the MSCI Korea 25/50 Index.

Direxion Daily CSI China Internet Bull 2X Shares CWEB – Up 81.3% YTD

The first half of 2017 was all about the tech rally worldwide. Solid earnings and increasing euphoria on digitalization and e-commerce made the space lucrative. The fund offers twice (2x) the leveraged exposure to the Chinese Internet market by tracking the CSI Overseas China Internet Index(read: 5 Best Performing Leveraged ETFs of May).

Direxion Daily Hmbldrs&Supls Bull 3X ETF NAIL – Up 71.5% YTD

The housing sector has been in good shape lately. If we go by the latest data points, new home sales rebounded in May after a downbeat April. Existing home sales for the month of May also increased to the third highest monthly level in a decade.  Favorable mortgage rates and a solid labor market helped the sector to put up a decent show. The fund tracks 300% of the performance of the Dow Jones U.S. Select Home Construction Index. (read: Surprise ETF Winners Post Fed Hike).

Direxion Daily MSCI India Bull 3x ETF INDL – Up 62.3% YTD

India ETFs gave a stellar show in the first half on economic optimism. Decent GDP data defying demonetization, the victory of the pro-growth prime minister’s party in some state elections, implementation of goods-and-services tax or GST from July, and a weaker greenback drove Indian stocks. The underlying index of the concerned fund gives 300% of the performance of the MSCI India Index (read: Buffett Endorses India: Do ETFs & Stocks Have More Upside?).

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