Leveraged ETFs Are Aggressive by Design. Here's What That Means for Investors

These ETFs take on significant debt to fund their massive gains.Over the past two decades, more investment firms have launched leveraged ETFs that aim to double or triple the gains of an underlying stock or index. For example, Direxion's Daily S&P 500 Bull 3x Shares (SPXL +0.04%) aims to triple the daily performance of the S&P 500. Here's what investors should know about these highly aggressive investments. Image source: Getty Images. If a fund wants to triple the S&P 500's daily return, it usually secures a short-term loan, called a "total return swap," from a bank. If it wants to triple its return with a $100 million investment in the S&P 500, it asks its partner bank to invest $300 million in the index on its behalf. ExpandNYSEMKT: SPXLDirexion Shares ETF Trust - Direxion Daily S&P 500 Bull 3x SharesToday's Change(0.04%) $0.08Current Price$216.41Key Data PointsDay's Range$212.50 - $220.8252wk Range$87.08 - $234.09Volume3.1M The bank agrees to pay the fund triple the S&P 500's daily gain from that "invested loan", but it collects interest on the entire $300 million loan until the contract expires. This structure is risky, since it triples the S&P 500's return on green days, but also triples its losses on red days. Furthermore, those gains and losses aren't cumulative; they reset every day. These funds also need to charge high fees to cover their interest expenses. That's why SPXL charges a net expense ratio of 0.87%. These leveraged ETFs might be appealing to aggressive short-term traders, but they're dangerous investments for most long-term investors.Read NextFeb 9, 2026 •By Eric TrieA Leveraged Bet on the Broad Market or Big Tech: SPXL vs. QLDFeb 3, 2026 •By Dave KovaleskiThese 2 ETFs Have Been Red-Hot: Can it Continue?Dec 27, 2025 •By Robert IzquierdoBetter High-Return ETF: SOXL vs. SPXLDec 21, 2025 •By Katie BrockmanSOXL vs. SPXL: These Leveraged ETFs Swing Big for Potentially Lucrative Returns -- but Are They Worth the Risk?Dec 21, 2025 •By Katie BrockmanQLD vs. SPXL: Is Tech-Heavy Growth or S&P 500 Diversification Better for Investors?Dec 20, 2025 •By Katie BrockmanSPXL vs. SSO: Do These Leveraged ETFs' Big Swings Pay Off for Investors? Here's What You Need to KnowAbout the AuthorLeo Sun is a contributing Motley Fool stock market analyst who has worked with the company since 2013, covering technology, consumer goods, industrial, and financial sectors. He became a self-made millionaire by age 40 through long-term investing, crediting lessons from Warren Buffett and Peter Lynch. Leo is a regular guest on CNBC Asia providing stock analysis on Chinese technology companies, including Tencent, Baidu, and Alibaba. He previously wrote for InvestorGuide and holds a bachelor’s degree in English from the University of Texas at Austin.TMFSunLionX@TMFSunLionStocks MentionedDirexion Shares ETF Trust - Direxion Daily S&P 500 Bull 3x SharesNYSEMKT: SPXL$216.41 (+0.04%) $+0.08*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.