Best 3x Leveraged ETFs

Invest in the best 3x Leveraged ETF and other assets with Interactive Brokers.

Leveraged exchange-traded funds (ETFs) can help you outperform the market if you get the direction correct. These ETFs give you the same exposure to assets as other ETFs but with leverage. While leverage can help you beat market indexes, it also presents substantial risks if things don’t work out. This guide will reveal some 3x leveraged ETFs to consider, along with the pros and cons of these types of funds.

8 Best 3x Leveraged ETF

Investors who want to use leverage to potentially increase their market returns may want to consider these top 3x leveraged ETFs.

1. ProShares TQQQ UltraPro ETF (NASDAQGM: TQQQ)

The ProShares TQQQ UltraPro ETF gives investors 3x leverage in the popular QQQ ETF. QQQ mirrors the Nasdaq 100 and gives investors exposure to many tech and growth stocks. The fund has generated an annualized return of 40.59% over the past 10 years. The fund has performed well and heavily relies on the performance of the “Magnificent Seven” stocks to continue outperforming. The fund has a 0.86% expense ratio, and its top three holdings are Microsoft (12.92%), Apple (12.29%) and NVIDIA (7.34%).

2. Direxion Daily Semiconductor Bull 3X Shares ETF (NYSEARCA: SOXL) 

The Direxion Daily Semiconductor Bull 3X Shares ETF exclusively invests in semiconductor and semiconductor materials stocks. Shares have increased by over 150% year-to-date, and the 5-year annualized return is 22.01%. The ETF mirrors the ICE Semiconductor Index. SOXL’s top three holdings are NVIDIA (8.40%), Broadcom (8.06%) and Advanced Micro Devices (7.23%). The fund has a 0.94% expense ratio.

3. ProShares UltraPro S&P 500 ETF (NYSEARCA: UPRO)

The ProShares UltraPro S&P 500 ETF gives investors 3x the daily performance of the S&P 500. The fund has returned 45.40% year-to-date and has an annualized return of 25.11% over the past 10 years. The fund has a 0.91% expense ratio and primarily invests in information technology (28.26%), healthcare (13.42%) and financials (12.42%). The S&P 500’s performance also gets swayed by the Magnificent Seven, but not as much as the Nasdaq 100. The top three holdings are Apple (7.72%), Microsoft (6.81%) and Amazon (3.13%).

4. Direxion Daily Technology Bull 3X Shares ETF (NYSEARCA: TECL)

The Direxion Daily Technology Bull 3X Shares ETF gives investors exposure to tech stocks and has soared 145.41% year-to-date. The annualized return over five years is 32.84%, and the fund carries a 0.97% expense ratio. The fund primarily invests in software (38.55%), semiconductors (25.12%) and technology hardware (24.56%). The fund’s top three holdings are Apple (23.49%), Microsoft (22.83%) and NVIDIA  (4.68%). 

5. ProShares UltraPro Dow30 ETF (NYSEARCA: UDOW)

The ProShares UltraPro Dow30 ETF gives investors 3x leveraged exposure to the Dow30. The fund has a 0.95% expense ratio and a 3-year annualized return of 24.72%. UDOW is primarily concentrated in financials (20.18%), healthcare (18.84%) and information technology (18.48%). The Dow30’s top three holdings are UnitedHealth Group (9.43%), Goldman Sachs (6.56%) and Microsoft (6.48%). 

6. Direxion Daily Financial Bull 3X ETF (NYSEARCA: FAZ)

The Direxion Daily Financial Bull 3X ETF gives investors exposure to stocks that revolve around financial services (33.87%), banks (24.09%), capital markets (21.31%), insurance (16.63%) and consumer finance (4.11%). The fund’s top three holdings are Berkshire Hathaway (13.18%), JPMorgan (9.21%) and Visa (8.33%). FAZ has generated a 3-year annualized return of 28.06% and has a 0.96% expense ratio.

7. ProShares Ultra VIX Short-Term Futures ETF (BATS: UVXY)

The ProShares Ultra VIX Short-Term Futures ETF isn’t the best long-term hold due to the fund’s historically poor performance. It also has a 0.95% expense ratio, which is normal for 3x leveraged funds but still high. However, traders flock to this fund because it holds onto VIX futures. These short-term contracts can experience quick and significant gains during market volatility. UVXY would have been one of the best trades before the pandemic, as shares jumped by over 750% from Feb. 14, 2020, to March 20, 2020. Shares dramatically dropped off soon after. A well-timed trade in this fund can outperform the other funds, but this isn’t remotely close to being a buy-and-hold ETF.

8. Direxion Daily Small Cap Bull 3X ETF (NYSEARCA: TNA)

The Direxion Small Cap Bull 3X ETF primarily invests in small-cap companies with high risk but incredible upside potential. This fund hasn’t performed as well as some of the other leveraged ETFs, only bringing in a 9.17% annualized return over the past three years. The fund has a lofty 1.09% expense ratio and primarily invests in industrials (17.35%), healthcare (16.87%) and financials (14.97%). The fund’s top three holdings are Super Micro Computer (0.58%), SPS Commerce (0.29%) and Rambus (0.29%).

What is a 3x Leveraged ETF?

A 3x leveraged ETF is a regular ETF with three times the leverage. These funds get into debt to acquire additional securities and realize higher profits if the assets move in their favor. These investments are riskier than traditional ETFs.

Advantages of 3x Leveraged ETFs

3x leveraged ETFs provide several advantages over traditional ETFs. These funds can achieve higher returns from leverage as long as investments move in a favorable direction. A long 3x ETF could outperform the market during a bull run. Short 3x leveraged ETFs thrive during bear markets. You can only lose the amount of money you put into the ETF. If you did 3x leverage with your own portfolio instead of an ETF, you can lose your entire portfolio and end up with a negative balance. That scenario is not possible with a 3x leveraged ETF.

Risk of 3x Leveraged ETFs

While the thoughts of a 3x leveraged ETF working out can make them inciting, the risks are significant. Your losses will be amplified, and these ETFs have higher expense ratios than most funds. It only takes a 33% loss from the underlying ETF to wipe out your capital from a 3x leveraged ETF.

Criteria for Choosing the Best 3x Leveraged ETFs

Investors can choose from several 3x leveraged ETFs. These are some of the top factors to keep in mind when looking through your choices.

Performance and Historical Returns

Investors should look at how a fund has performed in various economic cycles. This information can help investors gauge how the fund may perform during bullish and bearish markets. While past successes do not guarantee future successes, reliable returns can look promising.

Expense Ratios and Overall Costs

You should look at the expense ratio for an ETF. It reflects how much you have to pay for management and other expenses. However, 3x leveraged ETFs tend to have higher expense ratios than most ETFs. If this number is too high, it can make it more difficult to earn a profitable return on your investment.

Underlying Index and Sector Exposure

3x leveraged ETFs often copy another ETF or index. You should look at the underlying index and its assets to determine if the 3x leveraged ETF makes sense for you.

Trading Volume and Liquidity

3x leveraged ETFs can have dramatic price swings and quickly wipe out gains if they don’t go the right way. Investors should look at a fund’s trade volume and liquidity to determine if they can quickly exit from a fund if necessary. You don’t want to get stuck holding onto shares of a sinking 3x leveraged ETF because of liquidity issues.

Where to Invest in 3x Leveraged ETFs

3x leveraged ETFs are risky but have a higher potential upside than traditional ETFs. Regardless of which ETFs you choose, you will need a brokerage account to invest in those assets. You may want to consider some of these top brokers for your 3x leveraged ETFs.

Diversify Your Portfolio with 3x Leveraged ETFs

3x leveraged ETFs can present a significant upside if the market moves in your favor. These funds can put you in a great position to capitalize on bullish trends, but it’s important to spread your risk. Investing in several stocks and ETFs can strengthen your portfolio diversification and help you get closer to your financial goals.

Frequently Asked Questions 

Best 3x Leveraged ETFs Methodology

The best 3x leveraged ETFs methodology involved looking at ETFs that mirrored popular indexes like the Nasdaq 100 and S&P 500. Most 3x leveraged ETFs have long and short options. For instance, SQQQ is the short version of TQQQ. While these ETFs exist, they were not included on the list to avoid redundancies.