Which ETF is delivering the best performance?
Semiconductor 3x (SOXL)
Morningstar reports a trailing five-year annualized return of 56% for Semiconductor 3x (SOXL), versus 11% for the S&P 500 (SPY), which equates to a total return of 840% versus 72%, respectively. This means that SOXL delivered almost 12x the total return of the S&P over the past five years.
More recently, SOXL bottomed this past December, and then quickly gained 185% through today’s close, versus 24% for the S&P over that same period.
It seems that recent advancements in artificial intelligence, the race to 5G, and expectations for a big China deal, with a large semiconductor component, are all driving SOXL higher.
Leveraged ETFs
At ETF PM, we have been reporting the performance of leading leveraged ETFs for many years:
- 2019: Vanguard and others banned leveraged ETFs while ETF PM explains how to use these important new tools effectively. In fact, most financial news programs still have not adequately covered the leading leveraged ETFs and InvestableBenchmarks.com.
- Early 2019: Pensions & Investments included ETF PM among the industry’s leaders because we are working to “take the torch” from Jack Bogle.
- 2018: ETF PM highlighted the Nasdaq 100 3x (TQQQ), SOXL, and the extraordinary opportunity in leveraged income and growth, also known as risk parity.
- 2017 & 2018: We quickly recognized the potential for a mega stock market bubble led by semiconductors.
- Mid-2017: ETF PM was employing leveraged ETFs while many leading investors were still discussing outdated solutions.
- 2016 & 2017: Our passion for research helped ETF PM to identify Nvidia early, to launch Income and Tech 3x (IT 3x), and to predict a mega bubble ahead. Note, IT 3x gained 33% in the first quarter of this year, 72% in 2017, and 33% annualized over the past decade.
- Early 2016: ETF PM was among the first to explain the benefits of leading leveraged ETFs back in early 2016 with the launch of Income & Growth 3x (IG 3x). In 2017, IG 3x gained 42% while the S&P 500 rose by 22%.
Bottom Line
It is truly priceless for investors to learn that diversification can be a free lunch, and leveraged diversification can be a free retirement nest egg. Still, leveraged ETFs can deliver somewhat unexpected results at times.
We always caution investors to engage risk assets and leverage very slowly and cautiously, with prudent asset allocation, and to employ additional risk controls as needed.
ETF PM currently has long positions in all of the ETFs mentioned above.
Contact us today to learn more.
