The Standard and Poor's 500 (S&P 500) index is considered the main benchmark index to measure the performance of the U.S. equities markets. The index was formed in 1923 with a handful of stocks, and eventually grew to 500 stocks by 1957, when Standard Statistics merged with Poor's Publishing to form Standard and Poor's. The index holds approximately 500 of the top publicly traded companies that represent the economy, as determined by Standard and Poor's committee. Recently, the index has included foreign companies as well, increasing to 505 holdings as of April 15, 2016. The five-year performance of the S&P 500 was 12.18%, and the year-to-date (YTD) performance was 3.08%, as of April 18, 2016. Investors feeling highly bullish about the S&P 500 index may consider adding shares of a leveraged index exchange-traded fund (ETF) to their portfolios. The following is a comparison of two leveraged S&P 500 ETFs.

ProShares Ultra S&P 500

ProShares ULTRA S&P 500 (NYSEARCA: SSO) is a double-leveraged ETF that seeks to duplicate the one-day performance of the S&P 500 by 200%. Formed on June 19, 2006, the SSO has generated an 8.02% average annual return (AAR) since inception. As a leveraged ETF, investors must keep in mind that excess volatility can have negative impacts on performance, due to the compounding effect. The SSO is designed to double the one-day performance of the S&P 500, and it then resets to start over again the next day. The SSO has $192 billion in assets and has a 0.89% expense ratio. It owned 504 holdings and had an 18.27 price-earnings ratio (P/E) trading at 2.8X price-to-book (P/B), as of March 31, 2016.

The SSO fund owns the identical holdings of the S&P 500. The fund's top five holdings are Apple, Inc. (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Exxon Mobil Corporation (NYSE: XOM), Johnson & Johnson (NYSE: JNJ) and General Electric Company (NYSE: GE). The fund's three-year performance is 23.36% compared to 12.90% for the S&P 500. The one-year performance is 1.97% compared to the S&P 500 performance of 3.18%. The YTD performance was 5.62%, compared to 3.46% of the S&P 500, as of April 19, 2016. The average daily trading volume is 4.86 million shares. SSO is best suited for bullish investors with a short- to medium-term holding time frame.

ProShares UltraPro S&P 500

The ProShares UltraPro S&P 500 (NYSEARCA: UPRO) is a triple-leveraged ETF that seeks to duplicate the one-day performance of the S&P 500 by 300%. The UPRO holds the same companies as the S&P 500, and has an expense ratio of 0.95%. Formed on June 23, 2009, the UPRO has returned 39.68% since inception. The negative effects from compounding are more pronounced in the UPRO than the SSO. This is evidenced by the one-year performance of negative 1.08% compared to 1.97% for the SSO, and 3.18% of the S&P 500, as of April 19, 2016. The extra leverage is a double-edged sword that can erode performance during volatile market periods. The largest impact occurs when held for periods of time beyond six months.

The three-month performance of UPRO is 37.97%, compared to 12.32% for the S&P 500, which coincides with the objective of 300% performance improvement. The six-month performance starts to wane at 21.38% compared to 8.49% for the S&P 500. The YTD performance is 7.28% compared to 3.46% for the S&P 500. The longer UPRO is held, the greater the price decay forms, as volatility inevitably comes into the picture. Therefore, the ideal holding time for UPRO ranges from one day, as it was designed for, to less than six months. Holding periods longer than six months have shown that the effectiveness of the leverage not only diminishes, but actually backfires. The average daily trading volume is 3.9 million shares. The UPRO is best suited for very bullish investors with a short-term holding time frame.