5 Leveraged ETFs with Knockout Recent Returns

By Aryeh Katz | January 21, 2010 AAA

5 Leveraged ETFs with Knockout Recent Returns
The last few years have seen a proliferation of leveraged investment funds. First 2x, then 3x the daily performance of any number of indexes were offered by several ETF providers. Moreover, investors could choose between long and short products - funds that returned, for example, a multiple of the inverse of the Dow Jones Industrials Average.

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Below we've mapped out several of the best 3 month and 12 month performers in the leveraged ETF category - stocks that pushed the return envelope and still appear to have some momentum.

Ultra Returns from Ultra Tech
Year to date, the best performer among the leveraged ETFs is the ProShares Ultra Technology ETF (NYSE:ROM), which returned a gigantic 130% in 2009. The fund also performed well over the last 3 months, rewarding investors with better than 17.5%. ROM seeks to produce exactly twice the return of the Dow Jones U.S. Technology Index.


Basic Materials were Basically Great
The ProShares Ultra Basic Materials ETF (NYSE:UYM) seeks to return double the daily performance of the Dow Jones U.S. Basic Materials Index. This index is a collection of U.S. based miners, chemical producers, and forest and paper product companies. This ETF returned 120% over the last year, and has returned better than 15% for the latest 3 months.

ProShares Yet Again
Four of the top five returning leveraged funds of last year are ProShares products. The third is ProShares Ultra QQQ ETF (NYSE:QLD), which rose over 120% in the past twelve months and tacked on better than 13% in the last quarter. QLD seeks to return twice the results of the NASDAQ 100 on a daily basis.


The Odd Fund Out
It was a non-ProShares tech fund that took fourth spot among last year's best leveraged ETFs. The
Rydex 2x S&P Select Sector Tech (NYSE:RTG) turned in a performance similar to its ProShares competitors, racking up 109% over the year. RTG also had and outstanding quarter with a 19% gain. The reason? RTG is more narrowly focused. It seeks to double the daily return on the Technology Select Sector Index.

A Silver Lining and Sunny Days
Within the mining sector, the silver group was an especially strong performer. Thus ProShares Ultra Silver ETF (NYSE:AGQ) was last year's fifth best climber, giving an approximate 90% return. The fund is dedicated to returning 200% of the daily move in silver as measured by the Londonspot silver fixing price. The fund holds no actual silver, opting instead to trade in silver related financial instruments such as futures and options to achieve its aims.

The Wrap
Leveraged ETFs shone for those investors who chose the right sectors over the last year. For those who did not, of course, the results were gloomier. The leveraged game is not a slam-dunk by any stretch, and is best played with all investment precautions taken. (To learn about the structure of leveraged ETFs read Dissecting Leveraged ETF Returns.)

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