ProShares UltraPro Short S&P500 (SPXU)

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Examples

Take a look at the performance stats in the table. As an example, the triple-leveraged financial sector ETF averaged a 45.9% annualized total return over the past five years, which sounds excellent at first. One-third of this would be 15.3%. However, the financial sector has generated total annualized returns of 17.5%, on average, over the same time period. So if the leveraged ETF had returned triple the index's return each year, the annualized return should have been a much greater 52.5%.

On the other hand, consider the example of the triple-short S&P 500 ETF. If you had simply shorted the S&P 500 over the past five years, you would have lost 54.6% of your investment. So a $10,000 investment would have turned into $4,540. Not great performance by any definition. However, if you had purchased the triple-leveraged short S&P 500 ETF, you would be down 92.1%. Your $10,000 investment would now be worth just $790.

The takeaway is this: If the underlying index moves favorably, triple-leveraged funds can certainly go up, but they tend not to actually produce three times the underlying index's performance. On the other hand, when the underlying index isn't moving in your favor, triple-leveraged ETFs can be absolutely dangerous