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5 Best Leveraged ETFs of the Second Quarter of 2024
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The second quarter proved to be a banner quarter for Wall Street, with the S&P 500 and the Nasdaq Composite Index scaling new record highs on several occasions. Artificial intelligence (AI) optimism, strong corporate profit growth and rate cut bets were the major catalysts.
These resulted in increased demand for leveraged ETFs as investors sought 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 second quarter. These include ProShares Ultra Semiconductors (USD - Free Report) , ProShares Ultra Silver (AGQ - Free Report) , MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) , BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) and Direxion Daily Concentrated Qs Bull 2X Shares (QQQU - Free Report) . These funds will continue to be investors’ darlings, provided the sentiments remain bullish.
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 and 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.
ProShares Ultra Semiconductors (USD - Free Report) – Up 53.7%
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 227,000 shares.
ProShares Ultra Silver seeks to deliver two times the daily performance of the Bloomberg Silver Subindex. It has amassed $563.8 million and charges investors 95 bps in annual fees. The fund trades in an average daily volume of 1.4 million shares.
MicroSectors Gold Miners 3X Leveraged ETN seeks to deliver three times the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $270.8 million in its asset base and charges 95 bps in annual fees. MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 898,000 shares.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 30.5%
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 $5.9 billion in its asset base (read: Here's Why Tech ETFs Will Continue Their Bull Run).
Direxion Daily Concentrated Qs Bull 2X Shares offers two times the performance of the Indxx Front of the Q Index, which tracks the performance of the seven largest NASDAQ listed companies. It has amassed $9.4 million in its asset base and charges 1.07% in annual fees. Direxion Daily Concentrated Qs Bull 2X Shares trades in an average daily volume of 9,000 shares.
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5 Best Leveraged ETFs of the Second Quarter of 2024
The second quarter proved to be a banner quarter for Wall Street, with the S&P 500 and the Nasdaq Composite Index scaling new record highs on several occasions. Artificial intelligence (AI) optimism, strong corporate profit growth and rate cut bets were the major catalysts.
These resulted in increased demand for leveraged ETFs as investors sought 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 second quarter. These include ProShares Ultra Semiconductors (USD - Free Report) , ProShares Ultra Silver (AGQ - Free Report) , MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) , BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) and Direxion Daily Concentrated Qs Bull 2X Shares (QQQU - Free Report) . These funds will continue to be investors’ darlings, provided the sentiments remain bullish.
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 (read: ETFs to Tap as NVIDIA Becomes the Most Valuable Company).
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 and 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.
ProShares Ultra Semiconductors (USD - Free Report) – Up 53.7%
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 227,000 shares.
ProShares Ultra Silver (AGQ - Free Report) – Up 44.8%
ProShares Ultra Silver seeks to deliver two times the daily performance of the Bloomberg Silver Subindex. It has amassed $563.8 million and charges investors 95 bps in annual fees. The fund trades in an average daily volume of 1.4 million shares.
MicroSectors Gold Miners 3X Leveraged ETN (GDXU - Free Report) – Up 34.3%
MicroSectors Gold Miners 3X Leveraged ETN seeks to deliver three times the performance of the S-Network MicroSectors Gold Miners Index. It has amassed $270.8 million in its asset base and charges 95 bps in annual fees. MicroSectors Gold Miners 3X Leveraged ETN trades in an average daily volume of 898,000 shares.
BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 30.5%
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 $5.9 billion in its asset base (read: Here's Why Tech ETFs Will Continue Their Bull Run).
Direxion Daily Concentrated Qs Bull 2X Shares (QQQU - Free Report) – Up 25.2%
Direxion Daily Concentrated Qs Bull 2X Shares offers two times the performance of the Indxx Front of the Q Index, which tracks the performance of the seven largest NASDAQ listed companies. It has amassed $9.4 million in its asset base and charges 1.07% in annual fees. Direxion Daily Concentrated Qs Bull 2X Shares trades in an average daily volume of 9,000 shares.