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5 Best-Performing Inverse or Leveraged ETFs of 2022
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The year 2022 has been brutal for the stock market, with the S&P 500 Index on pace to snap a three-year winning streak and post the worst year since 2008. The index has plunged 19.8% this year. While most of the sectors have been in the red this year, with technology being the hardest hit, energy has remained the outperformer.
This has led to higher demand for leveraged and inverse-leveraged ETFs as these have fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained more than 80% in 2022.
These include MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) , Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) , Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV - Free Report) , AXS Short Innovation Daily ETF (SARK - Free Report) and ProShares UltraPro Short QQQ (SQQQ - Free Report) , and will remain investors’ darlings, provided the sentiments remain volatile.
Russia’s invasion of Ukraine, aggressive Fed rate hikes and global growth concerns have roiled the stock market badly. Additionally, a resurgence of COVID-19 cases in China has slowed down economic activities across the country.
The Fed has been on an aggressive tightening spree for more than decades. Fed Chair Jerome Powell raised interest rates for the seventh time this year, taking the benchmark rate to the range of 3.75% and 4.00% — the highest level since 2008. The increase in interest rates has made borrowing expensive, pushed up the cost of buying a new car or house, increased the cost of carrying credit card debt and thus heightened the risk of a recession (read: ETFs Set to Soar on Fed 50 Bps Rate Hike, Hawkish Tone).
However, the latest bouts of data, including consumer confidence, job report, producer price and manufacturing activity, suggests that the largest part of the economy remains resilient.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend.
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear (see: all the Inverse Equity ETFs here).
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) – Up 172%
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $1.7 billion in its asset base while trading in an average daily volume of 119,000 shares. The expense ratio comes in at 0.95%.
Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) – Up 124.1%
Daily Dow Jones Internet Bear 3X Shares provides three times inverse play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. Daily Dow Jones Internet Bear 3X Shares has attracted $56.5 million in its asset base and charges 95 bps in annual fees. The ETF sees an average daily volume of about 551,000 shares.
Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV - Free Report) – Up 121.8%
Direxion Daily 20+ Year Treasury Bear 3x Shares offers three times the inverse exposure to the same ICE U.S. Treasury 20+ Year Bond Index. With AUM of $476.9 million, Direxion Daily 20+ Year Treasury Bear 3x Shares charges 88 bps in fees and trades in a solid volume of 451,000 shares a day on average (read: Treasuries in Longest Slump Since 1984: Inverse ETFs Soaring).
AXS Short Innovation Daily ETF (SARK - Free Report) – Up 82.4%
AXS Short Innovation Daily ETF is an actively managed exchange traded fund focused on shorting disruptive innovation. It attempts to achieve the inverse of the return of the ARK Innovation ETF for a single day, not for any other period. AXS Short Innovation Daily ETF has amassed $317.5 million in its asset base and charges 75 bps in annual fees. It trades in a solid volume of 2.5 million shares a day on average.
ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. The index measures the performance of the 100 largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization.
ProShares UltraPro Short QQQ has AUM of $4.2 billion and trades in an average daily volume of about 117 million shares.
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5 Best-Performing Inverse or Leveraged ETFs of 2022
The year 2022 has been brutal for the stock market, with the S&P 500 Index on pace to snap a three-year winning streak and post the worst year since 2008. The index has plunged 19.8% this year. While most of the sectors have been in the red this year, with technology being the hardest hit, energy has remained the outperformer.
This has led to higher demand for leveraged and inverse-leveraged ETFs as these have fetched outsized returns on quick market turns in a short span. We highlight a bunch of the best-performing leveraged or inverse leveraged ETFs that have gained more than 80% in 2022.
These include MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) , Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) , Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV - Free Report) , AXS Short Innovation Daily ETF (SARK - Free Report) and ProShares UltraPro Short QQQ (SQQQ - Free Report) , and will remain investors’ darlings, provided the sentiments remain volatile.
Russia’s invasion of Ukraine, aggressive Fed rate hikes and global growth concerns have roiled the stock market badly. Additionally, a resurgence of COVID-19 cases in China has slowed down economic activities across the country.
The Fed has been on an aggressive tightening spree for more than decades. Fed Chair Jerome Powell raised interest rates for the seventh time this year, taking the benchmark rate to the range of 3.75% and 4.00% — the highest level since 2008. The increase in interest rates has made borrowing expensive, pushed up the cost of buying a new car or house, increased the cost of carrying credit card debt and thus heightened the risk of a recession (read: ETFs Set to Soar on Fed 50 Bps Rate Hike, Hawkish Tone).
However, the latest bouts of data, including consumer confidence, job report, producer price and manufacturing activity, suggests that the largest part of the economy remains resilient.
Leveraged and Inverse-Leveraged ETFs
Leveraged and inverse-leveraged ETFs either create a leveraged long/short position, an inverse long/short position, or a leveraged inverse long/short position in the underlying index through the use of swaps, options, futures contracts and other financial instruments. Due to their compounding effect, investors can enjoy higher returns in a short period, provided the trend remains a friend.
However, these funds run the risk of huge losses compared to traditional funds in fluctuating or seesawing markets. Further, their performance could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as weeks or months).
Investors should note that these products are suitable only for short-term traders as these are rebalanced on a daily basis. Further, liquidity can be a big problem as it can make the products more expensive than they appear (see: all the Inverse Equity ETFs here).
MicroSectors U.S. Big Oil Index 3X Leveraged ETN (NRGU - Free Report) – Up 172%
MicroSectors U.S. Big Oil Index 3X Leveraged ETN provides three times (3X or 300%) leveraged exposure to the Solactive MicroSectors U.S. Big Oil Index, which is equal-dollar weighted and provides exposure to the 10 largest U.S. energy and oil companies. MicroSectors U.S. Big Oil Index 3X Leveraged ETN has been able to manage $1.7 billion in its asset base while trading in an average daily volume of 119,000 shares. The expense ratio comes in at 0.95%.
Daily Dow Jones Internet Bear 3X Shares (WEBS - Free Report) – Up 124.1%
Daily Dow Jones Internet Bear 3X Shares provides three times inverse play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. Daily Dow Jones Internet Bear 3X Shares has attracted $56.5 million in its asset base and charges 95 bps in annual fees. The ETF sees an average daily volume of about 551,000 shares.
Direxion Daily 20+ Year Treasury Bear 3x Shares (TMV - Free Report) – Up 121.8%
Direxion Daily 20+ Year Treasury Bear 3x Shares offers three times the inverse exposure to the same ICE U.S. Treasury 20+ Year Bond Index. With AUM of $476.9 million, Direxion Daily 20+ Year Treasury Bear 3x Shares charges 88 bps in fees and trades in a solid volume of 451,000 shares a day on average (read: Treasuries in Longest Slump Since 1984: Inverse ETFs Soaring).
AXS Short Innovation Daily ETF (SARK - Free Report) – Up 82.4%
AXS Short Innovation Daily ETF is an actively managed exchange traded fund focused on shorting disruptive innovation. It attempts to achieve the inverse of the return of the ARK Innovation ETF for a single day, not for any other period. AXS Short Innovation Daily ETF has amassed $317.5 million in its asset base and charges 75 bps in annual fees. It trades in a solid volume of 2.5 million shares a day on average.
ProShares UltraPro Short QQQ (SQQQ - Free Report) - Up 81%
ProShares UltraPro Short QQQ provides three times inverse exposure to the daily performance of the Nasdaq-100 Index, charging 95 bps in annual fees. The index measures the performance of the 100 largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization.
ProShares UltraPro Short QQQ has AUM of $4.2 billion and trades in an average daily volume of about 117 million shares.