The Top Leveraged ETFs in Canada to Buy for December 2024

ByDan Kent Published On:

At times, having exposure to a particular stock market index, a specific stock, or one of the prevalent Canadian ETFs may not suffice. We may desire to escalate our exposure to attain higher gains, despite the risk of equally high losses. Many investors resort to leverage for this purpose.

However, not all investors wish to manually set up such a leveraged position, or they might not have the required capabilities within their brokerage. As an alternative, they consider a leveraged ETF to accomplish this task. In this article, we’ll examine some of the top leveraged ETFs in Canada at present, that offer an investor enhanced exposure to the daily investment outcomes of a specific stock or stock market index.

What are the best leveraged ETFs in Canada?

  • BetaPro S&P/TSX 60 2X Daily Bull ETF (HXU.TO)
  • BetaPro NASDAQ 100 2X Daily Bull ETF (HQU.TO)
  • BetaPro S&P 500 2X Daily Bull ETF (TSE:HSU.TO)
  • BetaPro S&P/TSX Capped Financials 2X Daily Bull ETF (TSE:HFU)
  • BetaPro Canadian Gold Miners 2X Daily Bull ETF (TSE:HGU)
  • BetaPro Silver 2X Daily Bull ETF (TSE:HZU)
  • BetaPro Crude Oil 2X Daily Bull ETF (HOU.TO)
  • Hamilton Enhanced Canadian Bank ETF (HCAL.TO)

BetaPro S&P/TSX 60 2X Daily Bull ETF (HXU.TO)

The BetaPro TSX 60 2X ETF (HXU.TO)  is a fund that will allow investors to get exposure to 200% of the daily movements of the TSX 60 Index. The TSX 60 index is the S&P 500 of Canada. It contains the 60 largest companies in the country. It is loaded with blue-chip financial institutions, oil and gas producers, pipelines, gold mining companies, and more.

Why just 60 stocks versus 500? The US economy is much bigger than ours, and I would argue that there are barely 100 companies of quality on the Toronto Stock Exchange, let alone 500. Canada is simply too small. The fund has a management expense ratio of 1.62%, meaning you’ll pay $16.20 per $1000 invested to own it on an annual basis.

This is a huge fee, akin to a mutual fund, and you’ll find that most of these leveraged ETFs have these types of fees. If you’re looking for amplified exposure to Canadian blue chips, this is a fund you’ll want to have a look at.

BetaPro NASDAQ 100 2X Daily Bull ETF (HQU.TO)

The BetaPro NASDAQ 100 2X ETF (HQU.TO) aims to give an investor 200% exposure to the top 100 stocks on the NASDAQ. The NASDAQ 100 contains the likes of Apple, Amazon, Microsoft, Alphabet, Netflix, and many more. With these types of blue-chip companies inside the NASDAQ 100, you’d think this fund would be a great long-term hold, right?

This fund has certainly impressed over the last decade, posting annualized returns of 26%, crushing the NASDAQ Index itself. The difficulty here is the amplification of the fund during the COVID-19 pandemic and the downfall it witnessed during the market correction in 2022. The fund is still down quite a bit from its 2021 highs, despite the NASDAQ being at near record levels at the start of 2024.

If you’re looking for amplified exposure to the NASDAQ, or other NASDAQ ETFs, this is a solid fund. Just keep in mind that the fund will have significantly more volatility than a S&P 500 or TSX leveraged ETF. Fees are 1.47%, $14.47 annually per $1000 invested.

BetaPro S&P 500 2X Daily Bull ETF (TSE:HSU.TO)

You likely notice a pattern here. Many of these funds are BetaPro, and most target a specific stock market index. This is typically what is done if one is looking for leveraged exposure. The BetaPro S&P 500 2X ETF (TSE:HSU.TO) aims to give the investor exposure to 200% of the movements of the S&P 500. The S&P 500 is the most prominent stock market index in North America and arguably the world, there exists of course other S&P 500 ETFs as well.

It contains the 500 largest companies in the United States and is largely used as the benchmark index for many portfolios.Its most significant holdings will contain the major technology companies and what they call “real world” economy stocks like Exxon Mobil, Johnson & Johnson, Visa, Berkshire Hathaway and more. The fund has performed admiringly well over the long term, with nearly 16% annualized returns.

However, it’s important to understand that much like the NASDAQ 100 ETF, a lot of this outperformance came from the COVID-19 pandemic, and its drawdown from the market highs in 2021 has been catastrophic, wiping out nearly 45% of its total value.Fees are 1.55%, $15.50 annually per $1000 invested.

BetaPro S&P/TSX Capped Financials 2X Daily Bull ETF (TSE:HFU)

The BetaPro 2X Capped Financials ETF (TSE:HFU) is a unique one for those looking for leveraged exposure to the financial sector, like Canadian banks and insurers, some of which can also be found in other bank ETFs.

Keep in mind, with assets under management of only $28M, this fund barely scraped the guidelines of a minimum of $25M in AUM to make this list.The TSX Capped Financials Index is a stock market index that tracks Canadian financials. As a capped index, it only allows a company to reach a specific allocation until it is rebalanced. The central thesis on owning this fund today is that you are bullish on the financial sector.

The Canadian financial sector has survived environments many other countries’ financial institutions have been unable to survive, such as the Great Financial Crisis. If it is within your risk tolerance, a leveraged bet on the sector may not be a bad idea to consider.Unfortunately, with a smaller AUM comes larger fees. This one comes at 1.67%, $16.70 annually per $1000 invested.

BetaPro Canadian Gold Miners 2X Daily Bull ETF (TSE:HGU)

A fund that has caught on in popularity over the last few years, primarily due to the rising price of gold due to inflation and economic uncertainty, the BetaPro Canadian Gold Miners 2X ETF (TSE:HGU) aims to give investors 200% exposure to a wide variety of gold miners.

Gold mining companies are more volatile than the underlying asset they rely on: gold. This is because they tend to thrive in earnings and cash flow when prices are good and suffer greatly when prices weaken. This is why if gold moves a percent or two, it is likely producers are moving more than this.

As a result, aside from other gold ETFs, many investors who like added volatility enjoy investing in miners, and the leveraged concept of HGU adds to that volatility and potential returns. This fund has enjoyed strong results during gold’s recovery in 2022 and 2023.

However, if we span the timeline to the last 3 years, this fund has lost nearly 50% of its value. So, investors beware. Management fees come in at 1.34%, meaning you’ll pay $13.34 annually per $1000 invested. This is one of the lowest management fees on this list.

BetaPro Silver 2X Daily Bull ETF (TSE:HZU)

If you’re into buying and selling commodities or into commodities ETFs with a little bit of leverage on the side, the BetaPro Silver 2X Daily Bull ETF (TSE:HZU) may be one you want to keep an eye on.

In the simplest explanation possible, this fund gives you 200% exposure to the price of silver. It does so by targeting the Solactive Silver Rolling Futures Index. Although a lesson for another article, futures are a type of derivative contract, much like an option.

The fund has gained a lot of popularity over the last year with a rising price of silver and currently sits at a healthy $55M in AUM. It’s also boasting 1-year returns of over 120%.

Fees come in at 1.35%, or $13.50 per $1000 invested.

BetaPro Crude Oil 2X Daily Bull ETF (HOU.TO)

Much like HZU, the BetaPro Crude Oil 2X ETF (HOU.TO) will aim to track the Crude Oil Rolling Futures Index at a 200% pace. So much like silver, it will utilize futures contracts based on the oil price and a little bit of leverage to drive returns.

In the simplest terms possible, when crude oil moves 1%, you can expect to earn just shy of double this or lose a little more than double this.Remember, with transaction fees, it’s highly unlikely these funds will track their respective benchmarks perfectly.The fund has gotten crushed in light of falling oil prices.

However, investing in this fund is based on predictions of future price movements, not past performance. If you think the price of crude oil will go up and want some leverage, you could consider this fund. Fees come in at $1.34%, $13.40 annually per $1000 invested.

A bonus longer-term leveraged ETF

Hamilton Enhanced Canadian Bank ETF (HCAL.TO)

The Hamilton Enhanced Canadian Bank ETF (HCAL.TO) is a fund that utilizes a modest amount of leverage to give an investor that extra “oomph” of returns they desire without having a lot of long-term decay in price.

The fund has a simple structure. It owns a portfolio of Canada’s big banks through another Hamilton Fund HCA, and from there, it tacks on 25% leverage to amplify returns. The fund hasn’t been around for long, debuting in late 2020. Still, it has gained a significant amount of assets over that timeframe, with AUM of $412M.Fees are just as expensive as the daily bull ETFs, coming in at $14.46 annually per $1000 invested.

However, at the time of writing, the leveraged component of this fund, even after fees, has caused it to outperform a portfolio of individual Canadian banks since its inception. If you’re bullish on Canadian banks, have a peek at this fund.

A fair warning about leveraged ETFs

Leveraged ETFs are risky. In fact, most investors should stay far away from them. They are not meant to be held long-term and should only be utilized in short-term trading strategies.

Although we won’t review the risks in this article, things like volatility decay are real. An investor could get into a bit of trouble with leveraged ETFs, particularly those that are inverse ETFs, meaning they move opposite to the daily performance of a particular stock or index.

If you endeavour to invest in these types of ETFs, make sure you read the fund prospectus, research the overall strategy, and decide if you can handle the risks and if it’s right for you. I went over some of the best leveraged ETFs in Canada today. I introduced various leverage styles, including funds with modest leverage that can be held long-term and those with significant leverage that should be utilized only as a short-term trading vehicle.

There are two things I did not include in this article. Leveraged inverse ETFs and any 3X leveraged ETFs. If you’re looking for inverse exposure (daily bear ETFs), here is a post on the best inverse ETFs in Canada.

If you’re looking for 3X ETFs, you’ll likely have to head south of the border, as we do not have many here in Canada. Of note, these funds pose significant risks. These investments should only be utilized by those with an exceptionally high tolerance for risk.

Can I buy leveraged ETFs in a TFSA?

Yes, buying leveraged ETFs inside of a TFSA is allowed. In fact, many investors who want to short the market, or in layperson’s terms, “bet on the market going down,” utilize leveraged inverse ETFs as they are not allowed to short stocks inside a TFSA.

This is a dangerous endeavour, however, as leveraged ETFs can head south fairly quickly, and you can end up destroying one of the best tax-free investment vehicles you have in the Tax Free Savings Account.Ultimately, you can do what you’d like with your TFSA within the rules, but I would not utilize it to buy leveraged ETFs. There are many other ETFs for TFSAs.

Why should you not hold leveraged ETFs?

A leveraged ETF, by nature, will be more volatile than the underlying stock or index it covers. For this reason, if you cannot handle the additional volatility, you should not own leveraged ETFs.

In addition to this, numerous studies have shown that leveraged ETFs, particularly those that carry large leverage and transaction costs like what we’ll go over below, are not good long-term holds. If you can handle the leverage component and want to buy and hold long-term, look to funds that utilize modest leverage, like 25%.

Are 3x leveraged ETFs good for the long-term?

3x leveraged ETFs, particularly those where the leverage resets daily, are not good long-term holds. Several factors make them poor investments to hold over the long term. One of the main reasons is volatility decay.

Leveraged ETFs tend to decay due to the daily price movements in the fund and the fact the leverage typically resets daily. This can also be called volatility drag. We won’t go over volatility decay in this article, but you can read an outstanding post on it here.

Can triple-leveraged ETFs go to zero?

Because of the amplified leverage and the overall volatility decay of a 3x leveraged ETF, it can certainly go to zero.

In the event the unit prices get low enough, funds can do a reverse split in an attempt to get the price back up and reduce the overall amount of units outstanding. However, if the fund is in bad enough shape, it could realistically just be closed down.

Can you hold 2x leveraged ETF long term?

Although 2X leveraged ETFs are better long-term holds than 3x leveraged ETFs, I still wouldn’t suggest buying and holding these long-term as decay still exists. You will likely find over time that these funds struggle to keep up with the underlying index they track for these reasons.

If you buy these funds, do so as a trading strategy and have a firm entry/exit plan. The longer you hold, the larger your odds for underperformance.