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TQQQ, UPRO, SOXL, UCO, and SDOW are the five best leveraged ETFs for 2022. This article will analyze their respective investment objectives, performance, fees, liquidity, and more to help you decide which one is best for you.
Best Leveraged ETFs: Overview
Thanks to these ETFs, it’s never been easier to trade with leverage. While these funds come with plenty of additional risks, they are arguably the most efficient way for the retail investor to use leverage.
Here are the five best leveraged ETFs:
- ProShares UltraPro QQQ (TQQQ)
- ProShares UltraPro S&P500 (UPRO)
- Direxion Daily Semiconductor Bull 3x Shares (SOXL)
- ProShares Ultra Bloomberg Crude Oil (UCO)
- ProShares UltraPro Short Dow30 (SDOW)
Next, we’ll take a close look at each of these leveraged exchange-traded funds.
Best Leveraged ETFs
#1. ProShares UltraPro QQQ (TQQQ)
- Expense Ratio: 0.95%
- AUM: $12.6 billion
- 3 Month Avg. Volume: 182,000,000
- Number of Holdings: 116
- Inception Date: 2010
The ProShares UltraPro QQQ (TQQQ) delivers 3x the daily performance of the Nasdaq-100 Index, which is the same index that the popular Invesco QQQ Trust (QQQ) follows.
Effectively, TQQQ does 3x whatever QQQ does for the day.
TQQQ is perhaps the most well-known leveraged ETF. It has the most assets under management and trades the most daily volume of any levered exchange-traded fund.
TQQQ’s top holdings consist mostly of tech stocks like Apple, Amazon.com, and Microsoft.
The Nasdaq-100 tends to be rather volatile in its own right – adding a 3x multiple on its price action should be more than enough.
Consider the ProShares UltraPro Short QQQ (SQQQ) if you’d like the exact opposite performance of TQQQ, or the ProShares Ultra QQQ (QLD) if you’d prefer 2x leverage instead of 3x.
#2. ProShares UltraPro S&P500 (UPRO)
- Expense Ratio: 0.93%
- AUM: $2.2 billion
- 3 Month Avg. Volume: 13,000,000
- Number of Holdings: 511
- Inception Date: 2009
The ProShares UltraPro S&P500 (UPRO) delivers 3x the daily performance of the S&P 500 Index.
UPRO is the cost-effective option amongst the 3x long leveraged S&P 500 ETFs – and it trades the most volume.
Just like TQQQ, UPRO’s top holdings include the Big Tech names, but to a lesser degree.
For example, FAAMG plus Tesla and Nvidia account for 45% of TQQQ but only 24% of UPRO.
The Direxion Daily S&P 500 Bull 3X Shares (SPXL) is the top alternative to UPRO. It trades similar volume and has a similar amount of AUM but is slightly more expensive to own.
The ProShares Ultra S&P 500 (SSO) is the 2x daily leveraged version.
#3. Direxion Daily Semiconductor Bull 3x Shares (SOXL)
- Expense Ratio: 0.96%
- AUM: $4.4 billion
- 3 Month Avg. Volume: 63,000,000
- Number of Holdings: 35
- Inception Date: 2010
The Direxion Daily Semiconductor Bull 3x Shares (SOXL) delivers 3x the daily performance of the ICE Semiconductor Sector Index, which tracks the most prominent semiconductor stockson the market.
SOXL is actually the second-largest leveraged ETF that you can buy, behind only TQQQ.
We believe this is a result of the significant volatility in the semiconductor industry. Adding leverage to that volatility provides plenty of price action for traders.
The top holdings in SOXL are Broadcom, Qualcomm, Nvidia, Intel, and AMD.
Direxion also offers a bearish counterpart to this ETF that trades under the ticker SOXS. As you might imagine, it delivers -3x the daily returns of the same semiconductor index.
Consider a non-levered semiconductor ETF for long-term exposure to this industry, such as SOXX or SMH.
#4. ProShares Ultra Bloomberg Crude Oil (UCO)
- Expense Ratio: 0.95%
- AUM: $970 million
- 3 Month Avg. Volume: 2,000,000
- Number of Holdings: 1
- Inception Date: 2008
The ProShares Ultra Bloomberg Crude Oil (UCO) provides 2x daily leverage to an index that consists of crude oil futures contracts.
UCO is commonly used to express a bullish view on energy prices in the short term. It is one of the best crude oil ETFs too.
It is structured as a commodity pool, but your interaction with buying and selling it will be the same as any leveraged ETF mentioned in this article.
UCO consists of three holdings of equal weights: a rolling monthly crude oil futures contract, an annually rolling June crude oil futures contract, and an annually rolling December crude oil futures contract.
We expect to see an increase in UCO’s trading volume as the global energy markets face some restructuring – and all the associated volatility that will come with that potential restructuring.
#5. ProShares UltraPro Short Dow30 (SDOW)
- Expense Ratio: 0.95%
- AUM: $402 million
- 3 Month Avg. Volume: 9,000,000
- Number of Holdings: 30
- Inception Date: 2010
The ProShares UltraPro Dow30 ETF (SDOW) offers 3x daily short leverage to the Dow Jones Industrial Average.
SDOW is meant for investors with a short-term bearish outlook on large-cap U.S. equities.
The top companies that you’re shorting three times over are UnitedHealth, Home Depot, Goldman Sachs, Microsoft, and McDonald’s. The five stocks make up about 32% of the fund.
The top sectors in SDOW and their corresponding weights are information technology (22%), health care (18%), financials (16%), consumer discretionary, and industrials (14%).
So you’re not shorting any specific sector with SDOW. You’re simply shorting 30 of the best blue-chip stocks on the market.
Additionally, the fund’s average market cap is shy of $400 billion. These tend to be relatively stable stocks.
Best Leveraged ETFs: The Risks
Leveraged ETFs should probably only be used by experienced traders.
These are meant for timing the market instead of time in the market. It’s unlikely that the average retail trader or investor has an advantage in the markets when using these funds.
However, we are in no position to tell you what to do or what not to do with your capital.
We included this section to make it explicitly clear that you can quickly lose all of your invested capital in a leveraged ETF if your trade goes against you.
Best Leveraged ETFs: FAQs
What is the best 3X leveraged ETF?
The best 3X leveraged ETF is the ProShares UltraPro QQQ (TQQQ) in terms of fees and liquidity. It’s the most traded leveraged ETF thanks to it following the most prominent stocks in the market, such as Apple, Tesla, and Amazon.
Are leveraged ETFs a good idea?
Leveraged ETFs are a good idea if you’re fully aware of how they’re intended to be used and their additional risks. They are meant to be held for a single day of trading and can easily vaporize your invested capital.
Are leveraged ETFs a good idea for the long-term?
No, leveraged ETFs are a horrible idea for the long-term. This is not an opinion but an objective fact of leveraged ETFs. Due to compounding and the daily resetting of leverage, leveraged ETFs are designed to be held for a single trading day. You cannot expect a 3x leveraged ETF to deliver 3x the index’s returns it tracks for periods greater than a day.
Is there a 3X SPY ETF?
There are 3x leveraged ETFs that effectively deliver 3x the daily performance of the SPY ETF. Funds such as UPRO SPXL offer 3x leverage on the daily returns of the same index that SPY tracks.
Bottom Line: Best Leveraged ETFs
We recommend familiarizing yourself with the risks of leveraged ETFs before using one.
Even then, try to objectively evaluate your perceived advantage in the market for that day of trading.
And know that you’re up against the best and fastest trading algorithms that have access to a lot more data than you.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best leveraged ETFs.
This article was updated on July 22nd, 2022 to reflect changes in each fund’s data.
