> ## Content Index > Fetch the complete content index at: https://us.mikirduit.com/llms.txt > Use this file to discover other available public pages before exploring further. # Leveraged and Inverse ETFs: Big Gains, Bigger Risks - URL: https://us.mikirduit.com/leveraged-and-inverse-etfs-big-gains-bigger-risks/ - Published: 2026-10-03T14:13:59.000Z - Updated: 2026-10-03T14:13:59.000Z - Description: Funds that double, triple or flip the returns of the S&P 500 and Nasdaq-100 have posted big numbers this year. Here is how leveraged and inverse ETFs work, what they have delivered through Oct. 2, 2026, and why they are built for short-term traders, not buy-and-hold investors. - Author: Surya Rianto - Tags: Index & ETF Watch, Markets *Funds that double, triple or flip the returns of the S&P 500 and Nasdaq-100 have posted big numbers this year. Here is how they work, what they have delivered and why they are not for everyone.* **Key takeaways** - Leveraged ETFs aim to deliver 2x or 3x an index's return. Inverse ETFs aim to profit when the index falls. - Through Oct. 2, 2026, 3x funds on both the S&P 500 and the Nasdaq-100 have beaten their benchmarks by wide margins. - The same amplification works in reverse. The S&P 500's 58.59% drop from 2007 to 2009 took about five years to recover from. - These are trading tools. They demand a plan, a stop-loss and a short time horizon. Exchange-traded funds have a reputation as the cautious choice: a cheap, diversified way to own the market without betting on individual stocks. For many ETFs, that reputation is deserved. For some, it isn't. A corner of the market uses borrowed money and short selling to magnify returns, or to reverse them. These funds can swing far more than the indexes they track, and investors who treat them like an ordinary index fund can get hurt. ### The ETF Spectrum ETFs come in several flavors, each with a different risk profile: - **Broad index funds** track benchmarks such as the S&P 500, the Nasdaq-100, a single country or the global market. They tend to be less risky than individual stocks, though their upside is more limited. - **Sector funds** focus on one industry or sub-industry. Investors often use them to bet on a rebound after a downturn. - **Commodity funds** follow gold, silver or oil, and can be timed to price cycles: buy when prices are falling, sell when they are rising. - **Income funds** generate payouts from options premiums and similar strategies. Their prices tend to move sideways, but the yields can be attractive. - **Leveraged and inverse funds** sit at the high-risk end. This article focuses on them. [XRT vs. XLU: Which State Street ETF Offers Better Rebound Potential?Two State Street sector ETFs — SPDR S&P Retail ETF (XRT) and Utilities Select Sector SPDR Fund (XLU) — are trading near multi-year lows, each pointing to a potential rebound of 14% to 38% over the medium term. Here’s how their risk, cost, and upside profiles compare.![](https://us.mikirduit.com/content/images/icon/Mikirduit-b20842d5-c2ca-4f96-9522-181d70872522.jpg)Mikirduit USSurya Rianto![](https://us.mikirduit.com/content/images/thumbnail/ETF-discount-75200958-7e69-43d2-b7d8-614aedab0e89.png)](https://us.mikirduit.com/xrt-vs-xlu-two-state-street-etfs-near-cyclical-lows-are-flashing-rebound-signals/) ### Two Ways to Raise the Stakes A **leveraged** ETF uses borrowed money or derivatives to try to deliver a multiple of an index's return, typically two or three times. An **inverse** (or "short") ETF aims to rise when the index falls. Three principles apply: 1. **Think short term.** If the market turns against you, losses grow in line with the leverage. The idea is to buy when the market is under pressure and sell when it rebounds. 2. **Know what you own.** Check whether a fund moves with its index or against it. 3. **Have a plan.** Treat these funds the way a professional trader would, with a written trading plan and a maximum loss you will accept, decided in advance. Both the S&P 500 and the Nasdaq-100 have leveraged and inverse ETFs, all from ProShares. ### The S&P 500 **Leveraged funds** | Fund | Leverage | Expense ratio | Dividend yield | 2026 YTD | 1-year | | -------------------------------- | -------- | ------------- | -------------- | -------- | -------- | | ProShares Ultra S&P500 (SSO) | 2x | 0.84% | \~0.64% | 20% | 24.79% | | ProShares UltraPro S&P500 (UPRO) | 3x | 0.88% | 0.72% | 27.39% | 33.51% | | *S&P 500 index* | n/a | n/a | n/a | *12.6%* | *14.99%* | *Figures through Oct. 2, 2026.* Both funds have clearly outperformed the index. But the question of whether UPRO is "better" than SSO comes down to how much risk an investor can stomach. History is a useful warning. The S&P 500 fell 58.59% between October 2007 and March 2009, then needed until January 2014, about five years, to recover. An investor holding a leveraged fund through a drop like that would have needed both the nerve and the extra capital to wait it out. **Inverse funds** ProShares Short S&P500 (SH) offers 1x inverse exposure. ProShares UltraPro Short S&P500 (SPXU) offers 3x. In a rising market they have lagged badly: SH is down 10.18% this year and 12.72% over 12 months, while SPXU is down 30.24% and 36.45%. But when stocks fall, they pay off: | S&P 500 decline | Period | SH | SPXU | | --------------- | ----------------------- | ------- | ------- | | \-9.29% | Feb. 12 – Mar. 30, 2026 | +9.27% | +31.82% | | \-19.68% | Feb. 18 – Apr. 8, 2025 | +23.79% | +81.49% | | \-8.69% | Jul. 15 – Aug. 6, 2024 | +10.52% | +33.16% | That makes inverse funds a potential hedge when the index is at a record high. An investor can hold one as protection while waiting for a pullback, and still benefit if the market keeps rising. Inverse funds charge slightly higher fees than the leveraged ones (SH: 0.88%, SPXU: 0.9%) but have higher yields (4.28% and 7.32%). ### The Nasdaq-100 The Nasdaq-100 has a similar lineup. ProShares Ultra QQQ (QLD) is 2x and ProShares UltraPro QQQ (TQQQ) is 3x. QLD has gained 37% this year and 40.56% over 12 months. TQQQ is up 53.66% and 52.65%. The index itself has risen 22.22% this year and 24% over 12 months. The inverse funds, ProShares Short QQQ (PSQ) and ProShares UltraPro Short QQQ (SQQQ), have been under pressure over longer periods, as their S&P 500 counterparts have. They have done well in selloffs, though. When the Nasdaq-100 fell 11.45% between June 4 and July 29, 2026, PSQ gained 11.57% and SQQQ gained 33.79%. PSQ charges a 0.95% expense ratio and yields about 4.42%. SQQQ charges 0.94% and yields 10.38%. ### The Bottom Line Leveraged funds can boost short-term gains when an investor believes a pullback in an index is nearing its end. Inverse funds can work as a hedge when an index is at a record high and risks are building. If the market drops, the gains can be sold for cash. It sounds simple, but it is hard to do in practice. Because these funds depend on timing, a correct call can pay off handsomely, while a wrong one means losses. Leveraged and inverse ETFs can sharpen returns, but they carry far more risk than a conventional index fund. *Performance figures are as of Oct. 2, 2026, unless noted. Past performance does not guarantee future results. This article is for informational purposes only and is not investment advice.* ## FAQ: Leveraged and Inverse ETFs ### **What is a leveraged ETF?** A leveraged ETF is a fund that aims to deliver a multiple of an index's return, typically two or three times. For example, ProShares Ultra S&P500 (SSO) targets 2x the S&P 500, and ProShares UltraPro S&P500 (UPRO) targets 3x. ### **What is an inverse ETF?** An inverse ETF, also called a short ETF, is designed to gain when its benchmark index falls. ProShares Short S&P500 (SH) offers 1x inverse exposure to the S&P 500, while ProShares UltraPro Short S&P500 (SPXU) offers 3x. ### **Are leveraged and inverse ETFs good for long-term investing?** No. They are short-term trading tools. If the market moves against you, losses grow in line with the leverage, so these funds suit traders with a plan, not buy-and-hold investors. ### **How have leveraged ETFs performed in 2026?** Through Oct. 2, 2026, they have beaten their indexes by wide margins. The S&P 500 is up 12.6% this year, while SSO is up 20% and UPRO is up 27.39%. The Nasdaq-100 is up 22.22%, while ProShares Ultra QQQ (QLD) is up 37% and ProShares UltraPro QQQ (TQQQ) is up 53.66%. ### **Is UPRO better than SSO?** It depends on risk tolerance. UPRO's 3x leverage has produced higher returns (27.39% vs. 20% this year), but losses would also be larger if the market fell. UPRO's expense ratio is 0.88%, vs. 0.84% for SSO. ### **How much can the S&P 500 fall, and how long can recovery take?** The S&P 500 fell 58.59% between October 2007 and March 2009, then took about five years, until January 2014, to recover. Anyone holding a leveraged fund through a drop like that would have needed the nerve and the capital to wait it out. ### **How do inverse ETFs perform when the market falls?** They tend to gain. During the S&P 500's 19.68% decline from Feb. 18 to April 8, 2025, SH rose 23.79% and SPXU rose 81.49%. When the Nasdaq-100 fell 11.45% from June 4 to July 29, 2026, ProShares Short QQQ (PSQ) gained 11.57% and ProShares UltraPro Short QQQ (SQQQ) gained 33.79%. ### **Why are inverse ETFs down in 2026?** Because stocks have mostly risen. Through Oct. 2, SH is down 10.18% for the year and SPXU is down 30.24%. Inverse funds lose value in rising markets and are best held briefly, such as around a pullback. ### **Can inverse ETFs be used as a hedge?** Yes. An investor can hold an inverse ETF when an index is at a record high, as protection against a drop. If the market falls, the gains can be sold for cash. If it keeps rising, the investor still owns the underlying index fund. ### **What are the fees and yields on these funds?** | Fund | Expense ratio | Dividend yield | | ---- | ------------- | -------------- | | SSO | 0.84% | \~0.64% | | UPRO | 0.88% | 0.72% | | SH | 0.88% | 4.28% | | SPXU | 0.9% | 7.32% | | PSQ | 0.95% | \~4.42% | | SQQQ | 0.94% | 10.38% | ### **What rules should traders follow with leveraged and inverse ETFs?** Three principles apply. Think short term, know whether the fund moves with or against its index, and trade with a written plan that includes a maximum stop-loss decided in advance. ### **What is the main risk?** Timing. Because these funds depend on correctly reading the market, a right call can pay off handsomely and a wrong one means losses. They carry considerably more risk than a conventional index fund. ## **The numbers are only the beginning.** Every week, Mikirduit US breaks down earnings, valuations, catalysts, and risks across U.S. stocks—so you can see what the market may be missing. [**Get the Weekly Briefing**](https://us.mikirduit.com/coke-is-up-23-pepsi-is-down-12-weight-loss-drugs-are-only-part-of-the-story/#/portal/signup)