Compare the best 3x leveraged ETFs to buy in 2023

By:

James Knight

James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.

Updated: Oct 11, 2022

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An Exchange Traded Fund (ETF) is a kind of mutual fund that can be bought and sold at a quoted price during market hours in exactly the same way that you can buy and sell stocks. The “fund” part means that, behind the scenes, the ETF pools investments from many investors to buy several securities (e.g., all the FTSE 100 stocks). It differs from a traditional mutual fund because traditional funds can only be bought or sold once per day at that day’s price. In this page, we will explore the most popular ETFs that are traded with 3x leverage.

Best 3x Leveraged ETFs to Buy Now

Based on returns, total assets under management, and prevailing market conditions, we have selected our top 10 3x leveraged ETFs:

1. ProShares UltraPro Short QQQ (SQQQ)

SQQQ is a fund issued by ProShares, which offers three times leveraged daily short exposure to the Nasdaq-100 Index. Bearish investors can make speculative bets against the index through this fund. The total assets under management (AUM) for SQQ are $1.3 billion at the time of writing, with an annual dividend yield of 0.91%. This “short” fund is best during bear markets, and it lost a lot of value in the five years to 2021 because the market was bullish.

2. Direxion Daily S&P 500 Bear 3X Shares (SPXS)

SPXS is another 3x leveraged ETF for bearish markets. Issued by Direxion, the fund seeks a 300% daily return on short exposure to the S&P 500. The fund uses assets such as securities and swaps to achieve its 3x daily short leverage. The fund’s total AUM at the time of writing is $612.8 million.

3. ProShares UltraPro Short S&P 500 (SPXU)

SPXU is an inverse leveraged fund. Issued by Proshares, SPXU seeks daily returns that are three times the inverse (-3x) of the daily performance of the S&P 500. This implies the fund reflects three times the opposite performance of the index. The fund would be most profitable during bear markets. The fund has a total asset base valued at $657.47m at the time of writing. As with all short ETFs, it lost value during the long bull run.

4. Direxion Daily S&P Biotech Bull 3X Shares (LABU)

LABU seeks to make investment returns from 3x daily exposure to the S&P Biotechnology Select Industry index. The fund invests in derivatives contracts to leverage against the index’s performance, which is rebalanced at the end of each trading session. The fund has a total AUM of $433.86M at the time of writing, and it has had a bumpy ride between 2020 and 2021.

5. Direxion Daily Semiconductor Bull 3X Shares (SOXL)

SOXL is a bullish fund that seeks to make investment returns from 3x daily exposure to the PHLX Semiconductor Sector index. SOXL uses swap agreements and futures contracts as leverage exposure to the index, which it rebalances daily. The total AUM of the fund is $2.01bn at the time of writing. It took a big dip in March 2020 due to the coronavirus pandemic but then bounced back even higher as the underlying assets bounced back.

Where to buy the best 3x Leveraged ETFs

Most broker accounts and other online trading platforms allow you to trade ETFs, and for some ETFs, this can include tax-efficient trading accounts such as a Stock & Shares ISA or Self-Invested Pension Plan (SIPP) in the UK.

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What is a 3x Leveraged ETF?

Leverage means trading or investing with borrowed money, in the same way that you might invest in a house by putting down a £10,000 deposit and borrowing another £90,000 as a mortgage from a bank. In this example, you have 10x leverage, which amplifies your gains such that you notionally double your £10,000 “investment”(an increase of 100%) if the value of your house rises by just 10% from £100,000 to £110,000.

A three times leveraged ETF triples your returns. If the underlying market — let’s say the FTSE 100 index — rises by 10%, your investment increases by 30%. Except that it doesn’t. Not exactly, because of the way derivatives are used under-the-covers to achieve the leverage, which makes leveraged ETFs more useful over the short term for day traders rather than long-term investors.

One more word of warning about leveraged ETFs. They amplify your losses as well as your gains! So, you need to identify your risk tolerance and stick with it. And be especially careful about “short” ETFs which go down when the underlying market goes up, and vice versa.

Are 3x leveraged ETFs a good investment?

3x Leveraged ETFs let ordinary investors (i.e., those with standard stockbroker share-dealing accounts) do the sorts of things that traders do with spread bets, contracts-for-difference (CFDs), or options: amplify gains through leverage, and “go short” to benefit from falling markets.

Be especially careful about investing in a short leveraged ETF. Any losses during a bull market will not only be amplified but are also potentially unlimited (because, theoretically, an underlying index or other asset can go on rising forever).

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