What does it take to be the top-performing ETF of all time? Hint: a good amount of leverage, a basket of tech stocks and a little bit of luck.
It's not a question that gets asked a lot. After all, why does it matter what the top-performing ETF of all time is? As the ubiquitous fund disclaimer notes, "past performance is no guarantee of future results."
So it might not matter, but it's still an interesting question. It's one I asked Eric Balchunas, senior ETF analyst and funds product specialist at Bloomberg. He told me what the top performer was, along with the next 14 ETFs with the best returns of all time.
|Ticker||Fund Name||Inception||Return % Since Inception|
|TECL||Direxion Daily Technology Bull 3x Shares||12/17/2008||3,259.93|
|TQQQ||ProShares UltraPro QQQ||11/2/2010||2,203.23|
|SVXY||ProShares Short VIX Short-Term Futures ETF||4/10/2011||1,892.97|
|UPRO||ProShares UltraPro S&P 500||6/25/2009||1,624.63|
|MIDU||Direxion Daily Mid Cap Bull 3x Shares||8/1/2009||1,597.08|
|SOXL||Direxion Daily Semiconductor Bull 3x Shares||11/3/2010||1,329.83|
|DRN||Direxion Daily MSCI Real Estate Bull 3x Shares||7/16/2009||1,268.93|
|MDY||SPDR S&P Midcap 400 ETF Trust||4/5/1995||1,130.79|
|UDOW||ProShares UltraPro Dow 30||11/2/2010||1,114.89|
|SPXL||Direxion Daily S&P 500 Bull 3x Shares||5/11/2008||1,021.55|
|CURE||Direxion Daily Healthcare Bull 3x Shares||6/15/2011||914.03|
|XIV||VelocityShares Daily Inverse VIX Short-Term ETN||11/29/2010||992|
|UMDD||ProShares UltraPro MidCap 400||11/2/2010||891.04|
|SPY||SPDR S&P 500 ETF Trust||1/22/1993||828.27|
|RETL||Direxion Daily Retail Bull 3x Shares||7/14/2010||848.3|
Data measures the period from inception through Oct. 24, 2017
Leveraged Tech ETFs Sizzle
Easily taking the top spot is the Direxion Daily Technology Bull 3x Shares (TECL), which has a 3,260% return since its inception in 2008.
TECL provides aggressive, leveraged exposure to a group that has done exceedingly well over the past decade―large-cap tech stocks. As the Apples, Microsofts and Googles of the world have surged higher, TECL followed suit.
TECL isn't the only leveraged tech ETF on the all-time list. The ProShares UltraPro QQQ (TQQQ), which provides 3x exposure to the tech-heavy Nasdaq-100 index, and the Direxion Daily Semiconductor Bull 3x Shares (SOXL), which provides triple-leveraged exposure to semiconductor stocks, have rallied 2,203% and 1,330%, respectively, since their launches.
"Tech has had a nice path up," said Balchunas. "That's the key for leverage; if you have a nice climb up with very low volatility, that's what I call a 'full moon.' That's when the compounding effect kicks in and those leveraged ETFs will give you four or five times the index, not just two or three," he explained.
Balchunas contrasted that with what normally happens to leveraged ETFs. Usually, "the volatility drag makes you get less than two or three times over longer time periods," Balchunas noted.
Along with tech, leveraged ETFs tied to other strong-performing sectors made the cut. The Direxion Daily MSCI Real Estate Bull 3x Shares (DRN) and the Direxion Daily Retail Bull 3x Shares (RETL) and the Direxion Daily Healthcare Bull 3x Shares (CURE) all have lifetime gains in excess of 800%.
Even leveraged ETFs tied to broad market indices―like the ProShares UltraPro S&P500 (UPRO) and the Direxion Daily Mid Cap Bull 3x Shares (MIDU)―were beneficiaries of the compounding effect that Balchunas talked about.
Timing Is Everything
But it isn't enough to simply have leverage and track an index with strong returns and low volatility. All of the funds on the list also have the advantage of another key factor: timing.
Many of these funds were launched at or near market bottoms. TECL came to market in December 2008, after the stock market plunge associated with the financial crisis was already in full swing; UPRO began trading in June 2009, only three months after the absolute low of the bear market; and CURE launched in June 2011, when the eurozone sovereign debt crisis was raging.
"With ETF launches, timing is everything―in both an asset-gathering sense and a performance sense," Balchunas said.