Making Sense of Leveraged ETFs: Are They the Right Choice for Long-Term Investors?

2 weeks ago 14

Jake Lerch, The Motley Fool

Thu, December 4, 2025 astatine 9:02 AM CST 6 min read

TQQQ has delivered a overmuch higher one-year instrumentality and greater exertion exposure, but with acold steeper humanities drawdowns than SSO
Both funds usage regular leverage resets, amplifying some gains and losses compared to accepted scale ETFs
TQQQ charges a somewhat higher interest and offers a marginally higher dividend yield, but besides carries dramatically higher hazard arsenic shown by its beta and volatility
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Leveraged exchange-traded funds (ETFs), specified arsenic ProShares UltraPro QQQ (TQQQ) and ProShares Ultra S&P 500 (SSO) are tempting concern options, but are they the close prime for semipermanent buy-and-hold investors? Here's what retail investors request to cognize astir these fashionable leveraged ETFs.

Metric

SSO

TQQQ

Issuer	ProShares	ProShares
Expense ratio	0.87%	0.82%
1-yr instrumentality (as of 2025-11-28)	18.8%	36.5%
Dividend yield	2.5%	2.7%
Beta	2.02	3.36
AUM	$7.3 billion	$30.9 billion

Beta measures terms volatility comparative to the S&P 500; beta is calculated from five-year play returns. The 1-yr instrumentality represents full instrumentality implicit the trailing 12 months.

TQQQ charges a marginally little disbursal ratio than SSO, making it a spot much affordable for cost-conscious traders. TQQQ besides offers a somewhat higher dividend yield, which could entreaty to those seeking a tiny income boost alongside leveraged growth.

Metric

SSO

TQQQ

Max drawdown (5 y)	-46.77%	-81.76%
Growth of $1,000 implicit 5 years	$2,735	$2,760

TQQQ tracks triple the regular returns of the Nasdaq-100 and is heavy tilted toward exertion (54%), with further value successful connection services (17%) and user cyclical stocks (13%). The money holds 123 positions, with apical weights successful Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT), and has operated for astir 16 years. The regular leverage reset is simply a captious quirk, meaning returns tin diverge from semipermanent scale moves, particularly successful volatile markets.

SSO, successful contrast, delivers 2x regular S&P 500 exposure, resulting successful a broader assemblage mix—technology (31%), a ample allocation to currency and others (30%), and fiscal services (9%). Its apical holdings are Nvidia, Apple, and Microsoft, but with little idiosyncratic weights. Both funds usage regular leverage resets, a operation that tin magnify losses arsenic good arsenic gains implicit time.

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While the imaginable of doubling oregon tripling the returns of a benchmark scale similar the S&P 500 is tantalizing, investors should recognize the finer points of leveraged ETFs earlier they instrumentality the plunge. Here are immoderate cardinal takeaways for mean investors.