Back to top

Image: Bigstock

10 Best Performing Leveraged ETFs of 2020

Read MoreHide Full Article

This year has witnessed historic twists and turns with the largest bull market turning into a bear market in March on the coronavirus outbreak, and then marking the fastest-ever recovery. The Wall Street has been hitting series of new highs lately on the back of super-easy monetary and fiscal policies, vaccine optimism and a potentially divided Congress.

A vaccine will end the pandemic, leading to a faster-than-expected economic recovery, while the divided government will lead to favorable economic policies with reduced chances of major tax increases and tighter regulations. Notably, America has started immunizing people by giving Pfizer (PFE - Free Report) shots, developed in collaboration with the German biotechnology company BioNTech (BNTX - Free Report) . This start of vaccination has strengthened investors’ confidence in the economy.

Further, hopes of new fiscal stimulus program before the end of the year is also fueling the stock market (read: 8 ETFs That Have Gained More Than 100% in 2020).

As such, the demand for leveraged ETFs continued to remain intact despite the bearishness in most of the first half of the year, as investors seek to register big gains in a short span. Leveraged funds provide multiple exposure (i.e. 2x or 3x) to the daily performance of the underlying index by employing various investment strategies such as swaps, futures contracts and other derivative instruments. Due to their compounding effect, investors can enjoy higher returns in a very short period of time, provided the trend remains positive.

Below we highlighted 10 leveraged equity ETFs that have been soaring in 2020, braving all the hurdles. These funds will continue to be investors’ darlings provided the sentiments remain bullish.

BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU - Free Report) – Up 348.6%

This note seeks to offer three times leveraged exposure to the NYSE FANG Index, charging 95 basis points (bps) in annual fees. The ETN has accumulated $1.1 billion in its asset base and trades in average daily volume of 544,000 shares.

Daily Dow Jones Internet Bull 3X Shares (WEBL - Free Report) – Up 140.4%

This fund provides three times leveraged play on the Internet corner of the broad technology sector by tracking the Dow Jones Internet Composite Index. It has attracted $44 million in its asset base and charges 95 bps in annual fees. The product sees average daily volume of 71,000 shares.

Direxion Daily S&P Biotech Bull 3x Shares (LABU - Free Report) – Up 90.3%

This fund creates a three times leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 95 bps and trades in heavy average daily volume of about 1.2 million shares. The fund has AUM of $330.3 million (read: 7 Leveraged ETFs of November With Spectacular Returns).

Direxion Daily Retail Bull 3X Shares (RETL - Free Report) – Up 79.2%

This ETF offers three times leveraged exposure to the S&P Retail Select Industry Index. The product has amassed about $60.3 million in its asset base, while charging 95 bps in fees per year. Its volume is lower as it exchanges around 11,000 shares a day on average.

ProShares Ultra Technology (ROM - Free Report) – Up 76.5%

This fund seeks two times exposure to the Dow Jones U.S. Technology Index, charging 95 bps in fees. It has amassed $728.2 million in its asset base and trades in a paltry volume of around 136,000 shares per day on average.

ProShares Ultra Semiconductors (USD - Free Report) – Up 68.2%

This product seeks two times the daily performance of the Dow Jones U.S. Semiconductors Index, charging investors 95 bps in annual fees. It has accumulated $162.5 million in its asset base while trading in volume of 61,000 shares a day on average (read: Semiconductor ETFs Up At Least 40% in 2020: More Gains Ahead).

Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (UBOT - Free Report) – Up 59.9%

This product seeks to deliver three times the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index. It has accumulated $53.9 million in its asset base and trades in an average daily volume of 7,000 shares. The ETF charges 95 bps in annual fees.

Direxion Daily CSI 300 China A Share Bull 2X Shares (CHAU - Free Report) – Up 55.2%

This product targets the Chinese equity market and offers two times the exposure to the CSI 300 Index, charging investors 95 bps in annual fees. It has AUM of $125.5 million and average daily volume of 124,000 shares.

Indxx MicroSectors Cannabis 2X Leveraged ETN (MJO - Free Report) – Up 51.8%

This ETN is linked to two times leveraged performance of the Indxx North American Cannabis Index. It has gathered $15.2 million in its asset base since its debut in December and charges 95 bps in annual fees. The note has average daily volume of 2,000 shares (read: Cannabis ETFs Set to Soar in 2021 on More U.S. Legalization).

ProShares Ultra Consumer Goods (UGE - Free Report) – Up 47.2%

This ETF offers two times the daily performance of the Dow Jones U.S. Consumer Goods Index, charging 95 bps in annual fees. It has amassed about $11.2 million in its asset base and trades in average daily volume around 2,000 shares.

Bottom Line

While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in fluctuating or seesawing markets. Further, the ETFs’ performance could vary significantly from the actual performance of their underlying index over a longer period compared with shorter period (such as weeks or months) due to their compounding effect (see: all the Leveraged Equity ETFs here).

Still, for ETF investors, who are bullish on U.S. equities for the near term, any of the above products could make an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance and a belief that the “trend is the friend” in this corner of the investing world.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>