10 Best Leveraged ETFs in Canada In 2022: Ready For The Risk?

Investors who want to diversify their holdings often turn to Exchange-Traded Funds (ETFs). ETFs allow you to invest in a basket of securities in the form of a single investment product.

Most ETFs offer investment returns by emulating the performance of underlying indices. Your returns on investment reflect closely the ups and downs of the specific index a fund is tracking when investing in such ETFs.

Do you want to enhance your returns by doubling or tripling the performance results of underlying indices?

My breakdown of the best leveraged ETFs in Canada will provide you with a list of securities you can consider investing in for this purpose.

Best Leveraged ETFs In Canada (1)

What Are Leveraged ETFs?

It’s important to understand what leveraged ETFs are so you are more informed when reviewing the best leveraged ETFs in Canada. A leveraged ETF is an ETF that’s different from typical funds.

It uses financial derivatives and debt as leverage to enhance the returns of an underlying index.

A typical ETF tries to match the performance of its benchmark index over time – a leveraged ETF attempts to double or triple the daily returns of an underlying index.

How Do Leveraged ETFs Work?

How Do Leveraged ETFs Work?

Leveraged ETFs work differently than traditional funds because they attempt to amplify the daily returns of an underlying index instead of trying to match the performance over a longer timeframe.

The fund manager uses borrowed money to buy derivatives like options and futures contracts to amplify the returns.

Leveraged funds are riskier assets to own than traditional ETFs because the leverage they use is a double-edged sword.

These funds enhance the daily returns, multiplying them twice or thrice. It means that any gains are amplified, implying greater returns for the daily performance of the benchmark index.

It also means any losses are also enhanced, entailing a higher degree of capital risk.

Leveraged ETFs also cost more than most ETFs because the fund manager rebalances the fund’s holdings daily.

Since the additional expenses are taken from the fund, they can reduce the net return you can expect to receive.

Best Leveraged ETFs In Canada

This section of my guide to the best leveraged ETFs in Canada will cover several of the top funds that you could consider investing in if you want to invest in financial instruments that offer enhanced exposure without the need to take on a margin loan.

This list contains the top Canada-listed leveraged ETFs you can consider. I have also mentioned some of the top US-listed leveraged ETFs in this section because they are available to Canadian investors as well if you’re investing in ETFs using a trading platform that offers a USD account.

My top choices are  Questrade or Wealthsimple.

Best Canadian Leveraged ETFs

Best Canadian Leveraged ETFs

1. Horizons BetaPro Gold Bullion 2x Daily Bull ETF (HBU)

horizons logo

Some facts about Horizons BetaPro Gold Bullion 2x Daily Bull ETF (HBU):

  • Ticker: TSX:HBU
  • Inception Date: January 22, 2008
  • Assets Under Management: $17.72 million (as of February 28, 2022)
  • Management Expense Ratio: 1.65%

Horizons BetaPro Gold Bullion 2x Daily Bull ETF (HBU) is a fund that seeks to provide you with daily investment results while attempting to correspond to enhancing the returns of its benchmark index by 200%.

HBU ETF tracks the performance of the Solactive Gold Front Month MD Rolling Futures Index ER.

The benchmark index tracks the performance of the front-month gold futures contracts and rolls the exposure over from the active contract into the next active contract.

Investing in HBU ETF means investing in the positive price movement for gold futures contracts, with your investment returns enhanced two-fold. HBU ETF comes with an MER of 1.65%.

2. Hamilton Enhanced Canadian Bank ETF (HCAL)

Hamilton Enhanced Canadian Bank ETF (HCAL)

Some facts about Hamilton Enhanced Canadian Bank ETF (HCAL):

  • Ticker: TSX:HCAL
  • Inception Date: October 14, 2020
  • Assets Under Management: $383.5 million (as of February 28, 2022)
  • Management Expense Ratio: 1.06%

Hamilton Enhanced Canadian Bank ETF (HCAL) is a fund that seeks to provide you with enhanced investment returns from the daily performance of the Solactive Canadian Bank Mean Reversion Index TR. Investing in HCAL ETF means investing in the performance of the Big Six Canadian banks.

Unlike other leveraged funds, HCAL ETF does not use derivatives to enhance investment returns and seeks to provide you with 1.25 times the returns of its benchmark index. The modest 25% cash leverage significantly reduces the risk and the returns compared to leveraged ETFs that target twice or thrice the daily returns of the benchmark index. HCAL ETF comes with an MER of 1.06%.

3. Horizons BetaPro Canadian Gold Miners 2x Daily Bull ETF (HGU)

horizons logo

Some facts about Horizons BetaPro Canadian Gold Miners 2x Daily Bull ETF (HGU):

  • Ticker: TSX:HGU
  • Inception Date: June 25, 2007
  • Assets Under Management: $130.89 million (as of February 28, 2022)
  • Management Expense Ratio: 1.35%

Horizons BetaPro Canadian Gold Miners 2x Daily Bull ETF (HGU) is a fund designed to provide you with investment returns that are twice the daily investment results of the Solactive Canadian Gold Miners Index.

The benchmark index tracks the performance of a basket of publicly-listed Canadian companies that have significant gold mining operations.

Investing in HGU ETF means investing in the performance of a basket of Canadian companies that primarily rely on their gold mining operations and getting two-fold returns.

The daily bull aspect of this fund means its returns correspond with the positive price movement, providing you two-fold upside when the fund moves upward and two-fold losses when it declines. HGU ETF comes with an MER of 1.35%.

4. Horizons BetaPro Crude Oil 2x Daily Bull ETF (HOU)

horizons logo

Some facts about Horizons BetaPro Crude Oil 2x Daily Bull ETF (HOU):

  • Ticker: TSX:HOU
  • Inception Date: January 15, 2008
  • Assets Under Management: $158.13 million (as of February 28, 2022)
  • Management Expense Ratio: 1.39%

Horizons BetaPro Crude Oil 2x Daily Bull ETF (HOU) seeks to provide you with daily investment results that endeavor to correspond to twice the daily performance of the Horizons Crude Oil Rolling Futures Index.

The fund’s benchmark index is designed to provide accurate returns mirroring the holding of its underlying commodity contract: the WTI Crude Oil price.

Investing in HOU ETF means getting twice the daily returns of the WTI Crude Oil futures contracts, exposing you to the enhanced performance of oil futures contracts. HOU ETF comes with an MER of 1.39%.

5. Horizons BetaPro NASDAQ-100 2x Daily Bull ETF (HQU)

horizons logo

Some facts about Horizons BetaPro NASDAQ-100 2x Daily Bull ETF (HQU):

  • Ticker: TSX:HQU
  • Inception Date: June 17, 2008
  • Assets Under Management: $251.07 million (as of February 28, 2022)
  • Management Expense Ratio: 1.49%

Horizons BetaPro NASDAQ-100 2x Daily Bull ETF (HQU) seeks to provide you with investment returns that attempt to correspond with two-fold the daily investment results of the NASDAQ-100 Index.

HQU ETF is a fund denominated in Canadian dollars. It means that any US dollar gains or losses due to the fund’s investments are hedged back to the Canadian dollar.

Investing in HQU ETF means investing in the performance of the 100 largest US-listed, international, and non-financial publicly-traded companies listed on the NASDAQ stock market, based on market cap. HQU ETF comes with an MER of 1.49%.

Best US Leveraged ETFs

Best US Leveraged ETFs

6. ProShares UltraPro QQQ ETF (TQQQ)

ProShares

Some facts about ProShares UltraPro QQQ ETF (TQQQ):

  • Ticker: NASDAQ:TQQQ
  • Inception Date: February 9, 2010
  • Assets Under Management: US$17.12 billion (as of February 28, 2022)
  • Management Expense Ratio: 0.95%

ProShares UltraPro QQQ ETF (TQQQ) is a fund that seeks to provide you with three-fold the returns of the NASDAQ-100 Index.

The US-listed ETF seeks daily investment results, corresponding with three times the daily performance of its benchmark index.

TQQQ ETF magnifies gains and losses by a significant margin, entailing substantial capital risk if its benchmark index underperforms.

Investing in TQQQ ETF means investing in the daily investment results of the performance of the 100 largest stocks listed on the NASDAQ stock exchange based on market capitalization.

TQQQ ETF is traded in US dollars, and it comes with an MER of 0.95%.

7. ProShares Ultra QQQ ETF (QLD)

ProShares

Some facts about ProShares Ultra QQQ ETF (QLD):

  • Ticker: NASDAQ:QLD
  • Inception Date: June 19, 2006
  • Assets Under Management: US$4.60 billion (as of February 28, 2022)
  • Management Expense Ratio: 0.97%

ProShares Ultra QQQ ETF (QLD) is a fund that seeks daily investment results that correspond to two times the daily performance of the NASDAQ-100 Index.

It is also a US-listed fund that uses leverage to enhance investment returns, similar to TQQQ ETF. However, it attempts to provide you with twice the returns of its benchmark index.

Investing in QLD ETF means investing in the daily investment results of the performance of the top 100 publicly-traded companies listed on the NASDAQ stock exchange based on market capitalization. QLD ETF comes with an MER of 0.97%.

8. ProShares Ultra S&P 500 ETF (SSO)

ProShares

Some facts about ProShares Ultra S&P 500 ETF (SSO):

  • Ticker: NASDAQ:SSO
  • Inception Date: June 19, 2006
  • Assets Under Management: US$4.002 billion (as of February 28, 2022)
  • Management Expense Ratio: 0.89%

ProShares Ultra S&P 500 ETF (SSO) is a fund that seeks daily investment results that emulate twice the daily returns of the S&P 500 Index.

The US-listed ETF uses leverage to enhance the investment returns to two-fold the performance of the benchmark index.

The fund’s underlying index is a widely used measure of large US stock market performance, comprising of the top 500 largest publicly-traded companies listed in the US stock markets based on market capitalization.

SSO ETF comes with an MER of 0.89%.

9. ProShares UltraPro S&P 500 ETF (UPRO)

ProShares

Some facts about ProShares UltraPro S&P 500 ETF (UPRO):

  • Ticker: NASDAQ:UPRO
  • Inception Date: June 23, 2009
  • Assets Under Management: US$2.96 billion (as of February 28, 2022)
  • Management Expense Ratio: 0.91%

ProShares UltraPro S&P 500 ETF (UPRO) is a fund that seeks daily investment results that correspond two thrice the daily returns of the S&P 500 Index.

The US-listed fund enhances the performance of its benchmark index by three times, significantly amplifying positive and negative movements.

The fund’s underlying index tracks the performance of 500 of the largest publicly-traded companies listed on US stock exchanges based on market capitalization. UPRO ETF comes with an MER of 0.91%.

10. Direxion Daily Small Cap Bull 3x Shares ETF (TNA)

Direxion ETF

Some facts about Direxion Daily Small Cap Bull 3x Shares ETF (TNA):

  • Ticker: NYSE Arca:TNA
  • Inception Date: November 5, 2008
  • Assets Under Management: US$1.76 billion (as of February 28, 2022)
  • Management Expense Ratio: 0.91%

Direxion Daily Small Cap Bull 3x Shares ETF (TNA) is a fund that seeks daily investment results that are three-fold of the performance of the Russel 2000 Index.

The US-listed ETF tracks the performance of a broad US stock market index that measures the performance of 2,000 smaller publicly-traded companies listed on US stock exchanges based on market capitalization.

TNA ETF attempts to use derivatives and debt instruments to provide you with thrice the daily investment results of its benchmark index.

Investing in TNA ETF means investing in the bullish performance of small-cap stocks listed in the US. TNA ETF comes with an MER of 0.91%.

Can I Buy Leveraged ETFs In TFSA?

Yes, it is indeed possible for you to buy and hold leveraged ETFs in your TFSA if you want to capitalize on the enhanced returns these financial instruments can provide without incurring capital gains tax.

However, it would be a risky proposition.

Leveraged ETFs are best used as short-term investments, and the TFSA is ideal for long-term investments.

Using your TFSA contribution room to hold leveraged ETFs for a short time could result in you coming into the view of the Canada Revenue Agency and losing the tax-free status of your account.

Choosing to use your TFSA to buy and hold leveraged ETFs for the long term could result in significant losses if the fund underperforms.

Additionally, you cannot claim your losses when filing your taxes because you make contributions to your TFSA with after-tax dollars.

How To Buy Leveraged ETFs In Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

ImageProduct TitleFeaturesPrice
Editor's Choice
Wealthsimple Trade
Wealthsimple Trade
  • ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable Brand
  • Beautiful Design
Get $50 Signup Bonus
Reliable Pick
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Desktop and mobile trading
  • Most types of accounts available
Get $50 Free Stock Trades

To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

Leveraged ETFs are complex and speculative short-term investments that entail a higher degree of capital risk than most other ETFs.

By doubling or tripling the daily return of a specified index, the funds can provide you with substantial upside on your initial investment or devastate your returns.

Provided that you are willing to assume the risk that comes with these leveraged ETFs, this breakdown of the best leveraged ETFs in Canada covers several financial instruments you could consider adding to your portfolio.

If you are a risk-averse investor and are okay with creating a passive income stream with lower but fixed returns on your investment, you might want to check out my breakdown of the Best Bond ETFs in Canada.

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Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

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