You might think that the stock market’s high volatility so far this year would drive investors to safe assets, but that hasn’t always been the case, at least among exchange-traded funds.
The most-actively traded ETF so far this year is the ProShares UltraPro QQQ TQQQ, formulated to triple the daily gain or loss of the technology-laden Nasdaq-100 index, according to Vanda Research and FactSet, as cited by the Wall Street Journal.
Trading volume for the fund has jumped 65% from last year, and its assets have soared 58%. The fund’s value has slid 29% year to date, compared to a 9% loss for the Nasdaq-100.
If the index falls substantially, you can suffer a very serious loss with this fund.
TIMOTHY A. CLARY/AFP via Getty Images
Is The Risk Worth The Reward?
There’s a risky way to bet against the Nasdaq-100, too.
It’s the ProShares UltraPro Short QQQ ETF SQQQ. This fund is the fourth most-highly traded ETF so far this year, according to Vanda Research and FactSet, as cited by the Journal.
The fund is supposed to triple the inverse move of the Nasdaq-100 daily. So if the index falls 1% in a day, the ETF should rise 3%.
The fund has gained 12% year to date. That, of course, is much less than three times the 9% that the Nasdaq-100 has moved, but the ETF is meant to match three times the inverse return only for each individual day, not for longer periods.
In any case, you can see the risk of funds that try to triple the return or inverse return of an index that can easily rise or fall by large amounts.
As for individual technology stocks, among those receiving wide moat designations from research firm Morningstar are Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (FB), Microsoft (MSFT) and Nvidia (NVDA).
