SPXL vs. SSO: Do These Leveraged ETFs' Big Swings Pay Off for Investors? Here's What You Need to Know

The ProShares Ultra S&P 500 ETF (NYSEMKT:SSO) and the Direxion Daily S&P 500 Bull 3X Shares ETF (NYSEMKT:SPXL) are both designed for traders and investors seeking magnified returns from daily moves in the S&P 500, but they differ in their leverage factor and risk profile.

SPXL targets triple the daily move of the S&P 500, resulting in greater potential upside and downside, while SSO aims for double. This comparison weighs their costs, performance, portfolio makeup, and unique risks for anyone considering a leveraged S&P 500 play.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

SSO and SPXL charge the same amount in fees, but SPXL offers a slightly higher dividend yield. Because both of these ETFs perform best as short-term investments, however, fees and yield likely won't be significant factors for investors to consider.

Performance & risk comparison

SPXL's triple leverage has resulted in both higher five-year gains and much steeper historical declines compared to SSO, highlighting the increased risk and reward potential. The deeper max drawdown for SPXL signals a bumpier ride during market corrections.

What's inside

SPXL tracks the S&P 500 with triple daily leverage, holding just over 500 stocks and leaning heavily into technology (35% of total assets), financial services (14%), and consumer cyclical (11%). Its largest allocations are to Nvidia, Apple, and Microsoft, each making up less than 10% of the fund's total assets.

SSO also seeks leveraged S&P 500 exposure, but at 2x daily leverage, with a similar sector profile and top holdings. Like SPXL, SSO employs a daily leverage reset, which can cause performance to diverge from expectations if held long term or during volatile markets.

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What this means for investors

Leveraged ETFs are higher-risk investments, but they also have the potential for more significant earnings. Both SSO and SPXL track the S&P 500, but the primary difference between them is their leverage factor.

SSO aims to earn 2x the daily returns of the S&P 500, while SPXL targets 3x daily returns. Of the two, SPXL has higher earning potential, but that increases its risk and volatility, too.

SPXL's total returns have only marginally surpassed SSO's over the last 12 months, but it has performed well over the past five years -- more than tripling in that time and earning substantially higher returns than SSO.

What investors will need to decide, then, is whether those potential returns are worth the volatility. SPXL's max drawdown is much higher than SSO's, indicating severe price swings over the last five years. Its higher beta also demonstrates higher levels of volatility.

Volatility isn't necessarily a bad thing, as long as you're prepared for it. If you're willing to risk the significant price swings, SPXL could be the more lucrative of these two leveraged ETFs.

Glossary

Leverage: Using borrowed funds or derivatives to amplify investment returns, increasing both potential gains and losses.
Expense ratio: The annual fee, expressed as a percentage of assets, that a fund charges its shareholders.
Beta: A measure of an investment's volatility compared to the overall market; higher beta means more price swings.
Drawdown: The percentage decline from a fund's peak value to its lowest point over a specific period.
Dividend yield: Annual dividends paid by a fund or stock, shown as a percentage of its current price.
Daily leverage reset: The process where leveraged funds adjust their exposure each day to maintain a set leverage ratio.
Path-dependent results: Outcomes that depend on the sequence of returns, not just the overall return, often affecting leveraged funds.
AUM (Assets Under Management): The total market value of assets that a fund manages on behalf of investors.
Sector profile: The breakdown of a fund's investments by industry sectors, showing where its assets are concentrated.
Max drawdown: The largest observed loss from a fund's peak to its trough during a specific period.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.

Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.