Yahoo Finance 5 Best-Performing Leveraged ETFs of 1H
Wall Street has been on a remarkable rally in the first half of the year, buoyed by the artificial intelligence (AI) craze, hopes of rate cuts, optimism over a resilient economy, improving corporate earnings and the rising share of the "Magnificent Seven." Notably, the technology sector is the clear leader of the market rally so far this year.
The favorable factors resulted in increased demand for leveraged ETFs as investors looked to register big gains in a short span. We highlight a bunch of the best-performing leveraged equity ETFs from different corners of the market that are leaders in their segments for the first half. These include T-REX 2X Long NVIDIA Daily Target ETF NVDX, ProShares Ultra Semiconductors USD, BMO REX MicroSectors FANG+ Index 3X Leveraged ETN FNGU, 2x Bitcoin Strategy ETF BITX and ProShares UltraPro QQQ TQQQ. These funds will continue to be investors’ darlings, provided the sentiments remain bullish.
The Nasdaq Composite emerged as an outperformer, gaining 18%. Meanwhile, the S&P 500 and Dow Jones Industrial have risen 14.7% and 3.8%, respectively. The strong trend is likely to continue in the second half as well.
The S&P 500 has achieved multiple records and gained at least 500 points in the first six months. The index topped the 5,500 level for the first time last week after hitting the 5,400 threshold earlier this month and 5,300 last month. In particular, the "Magnificent Seven" is the biggest engine of growth for the S&P 500, accounting for 31% of the weightage in the index, with NVIDIA NVDA leading the way in the AI revolution (read: 5 Technology Stocks Powering S&P 500 ETF This Year).
Large-cap stocks have shown strong resilience to longer-than-expected periods of higher interest rates as these stocks are less volatile, have a steady dividend stream and offer stability. Large-cap companies, especially those with pricing power, can better navigate inflationary pressure by passing on costs to consumers. This makes them attractive to investors looking for inflation protection amid sticky inflation.
In the latest FOMC meeting, U.S. policymakers penciled in just one rate cut for this year. They foresee four cuts for 2025. Lower interest rates generally lead to reduced borrowing costs, helping businesses to expand operations easily and resulting in increased profitability. This, in turn, will stimulate economic growth and provide a boost to the stock market.
Leveraged ETFs
Leveraged ETFs provide multiple exposures (2X or 3X) to the daily performance of the underlying index. These funds employ various investment strategies, such as the use of swaps, futures contracts and other derivative instruments to accomplish their objectives. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend.
Since most of these ETFs seek to attain their goals on a daily basis, their performances could vary significantly from the performance of their underlying index or benchmark over a longer period compared with a shorter period (such as weeks, months or years) due to their compounding effect (see: all Leveraged Equity ETFs here).
Investors should also note that leveraged ETFs involve a great deal of risk than traditional funds. They are often more costly and can be less tax-efficient, as they can see capital gains through the use of swaps and other derivative instruments.
T-REX 2X Long NVIDIA Daily Target ETF (NVDX) – Up 440.2%
T-REX 2X Long NVIDIA Daily Target ETF seeks to magnify (200%) the daily performance of the NVIDIA. It has AUM of $627 million and an expense ratio of 1.05%. T-REX 2X Long NVIDIA Daily Target ETF trades in an average daily volume of 897,000 shares.
ProShares Ultra Semiconductors (USD) – Up 161.4%
ProShares Ultra Semiconductors offers two times exposure to the daily performance of the Dow Jones U.S. Semiconductors Index. It has gathered $1.4 billion in its asset base and charges 95 bps in fees per year from investors. USD trades in an average daily volume of 369,000 shares (read: Best-Performing Stocks of the Top ETF of the First Half).
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) – Up 82.5%
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN seeks to offer three times leveraged exposure to the NYSE FANG Index. The Index includes 10 highly liquid stocks that represent industry leaders across today’s tech and Internet/media companies. BMO REX MicroSectors FANG+ Index 3X Leveraged ETN charges 95 bps in annual fees and trades in an average daily volume of around 878,000 shares. It has accumulated $5.6 billion in its asset base.
2x Bitcoin Strategy ETF (BITX) – Up 52.9%
2x Bitcoin Strategy ETF is a leveraged Bitcoin-linked ETF that seeks to provide daily investment results that correspond generally to twice the performance of the S&P CME Bitcoin Futures Daily Roll Index. It has AUM of $1.5 billion and an expense ratio of 1.85%. 2x Bitcoin Strategy ETF trades in an average daily volume of 4 million shares.
ProShares UltraPro QQQ (TQQQ) – Up 47%
ProShares UltraPro QQQ offers three times the leveraged exposure to the NASDAQ-100 Index. It has amassed $24 billion in AUM and trades in a heavy volume of 51 million shares, on average. It charges 88 bps in annual fees.
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
ProShares UltraPro QQQ (TQQQ): ETF Research Reports
ProShares Ultra Semiconductors (USD): ETF Research Reports
MicroSectors FANG+ Index 3X Leveraged ETN (FNGU): ETF Research Reports
2x Bitcoin Strategy ETF (BITX): ETF Research Reports
T-REX 2X Long NVIDIA Daily Target ETF (NVDX): ETF Research Reports
