Why This Leveraged S&P 500 ETF Can Lose Money Even When Stocks Rise

1 hour ago 1

Ryne Mauck

Sun, July 26, 2026 astatine 5:55 PM CDT 5 min read

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SPXL's regular leverage reset creates volatility resistance that tin nutrient losses adjacent erstwhile the S&P 500 finishes higher.
Long-term investors seeking S&P 500 vulnerability are amended served by SPY, which carries a acold little disbursal ratio than SPXL's 0.84%.
SPXL delivered 155% cumulative five-year returns but works champion successful sustained bull markets with debased regular volatility, not sideways chop.
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The S&P 500 is up astir 10% successful 2026, connected way for different twelvemonth of beardown performance, prompting galore investors to look for ways to amplify their returns. One progressively fashionable enactment is the Direxion Daily S&P 500 Bull 3X Shares (NYSEARCA:SPXL), a leveraged ETF designed to present 3 times the daily show of the S&P 500.

At archetypal glance, the strategy appears straightforward. Simply put, if the scale rises, SPXL should emergence adjacent more. However, leveraged ETFs are acold much analyzable than galore investors realize. Because SPXL resets its leverage daily, its semipermanent show tin disagree importantly from 3 times the S&P 500's return. In immoderate cases, investors tin adjacent suffer wealth implicit a play erstwhile the scale itself finishes higher.

A woody artifact displaying 'S&P500' successful achromatic substance is positioned connected apical of assorted stacks of shiny metallic and golden coins, arranged successful an ascending signifier from near to right. A integer candlestick chart, with greenish and reddish bars indicating marketplace fluctuations, is overlaid connected the coins and the achromatic background. Numerical values ranging from 729500.00 to 733500.00 are disposable connected the acold right, representing information points connected the chart.

Before purchasing SPXL, investors should recognize however regular leverage, compounding, and marketplace volatility tin power returns, and wherefore this money is mostly intended for short-term tactical trading alternatively than semipermanent investing.

Why Leveraged ETFs Don't Always Deliver Multi-X Long-Term Returns

One large misconception astir leveraged ETFs is that they simply multiply an index's semipermanent performance. In reality, funds similar SPXL are designed to present 3 times the S&P 500's regular return, not its instrumentality implicit weeks, months, oregon years.

Because the money resets its leverage astatine the extremity of each trading day, returns compound implicit time, causing show to beryllium not lone connected wherever the marketplace ends up, but besides connected the way it takes to get there.

This effect becomes much noticeable during times of volatility oregon agelong periods of sideways chop.

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Large swings successful either absorption tin gradually erode returns done what's commonly known arsenic volatility drag. This means that SPXL whitethorn importantly underperform 3 times the S&P 500's cumulative gain, oregon successful a worst-case script adjacent suffer wealth during periods erstwhile the scale finishes higher.

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