The ETF industry has seen explosive growth in leveraged and single-stock funds, with more than 430 products now available.

Over 270 of these are based on a single stock, and roughly two-thirds launched in the past year alone.

>>> Meta Stock Falls 11% as Alphabet Rises 16% in a Month

Funds like the ProShares UltraPro QQQ ETF (TQQQ), which targets triple the daily return of the Nasdaq-100, have been around for years.

But the recent surge in new offerings reflects growing investor appetite for amplified returns.

How Leveraged ETFs Actually Work

Leveraged ETFs tied to stocks or indexes do not invest directly in the underlying assets. Instead, they use derivative contracts to deliver a multiple of the daily return.

The "daily" reset is crucial. After each trading day, leverage resets, and the cycle repeats.

Holding a leveraged ETF beyond a single day can lead to returns that differ significantly from the underlying index.

>>> TD Cowen Upgrades Carnival Corporation to Top Picks, Raises Price Target

This daily reset creates a mathematical drag known as volatility decay. When an index fluctuates without a clear trend, compounding can work against the holder.

For example, if a leveraged fund falls 10% and then rises 10% on consecutive days, it does not break even.

Prolonged choppy trading can cause a leveraged product to lose money even as the underlying asset rises. This makes them unsuitable for long-term buy-and-hold strategies.

Key Numbers Investors Should Worry About

Comparing TQQQ to the Invesco QQQ ETF (QQQ) highlights the trade-offs. TQQQ has an expense ratio of 0.82%, versus 0.18% for QQQ.

Its maximum drawdown in 2020 was -70%, compared to -29% for QQQ, and in 2022 it hit -81% versus -35%.

Despite these risks, TQQQ has delivered a total return of 665% since 2020, far outpacing QQQ's 252%.

>>> Analysts Maintain Positive Ratings on Citigroup Following Value Stock Analysis

However, its five-year standard deviation of daily returns is 4.86%, nearly three times QQQ's 1.65%.

Investors may be tempted by the high returns, but the volatility and decay can erode gains quickly. These products are designed for short-term trading, not long-term holding.

The trend toward single-stock leveraged ETFs adds another layer of risk.

Betting on individual companies with leverage magnifies both gains and losses, and the daily reset compounds the danger.

Regulators have expressed concerns about these products, but demand continues to grow. As of May 20, 2026, the market shows no signs of slowing down.

>>> Deutsche Bank and Raymond James Raise Charles Schwab Price Targets

Investors should understand the mechanics before diving in. Leverage can amplify returns, but it also amplifies losses and introduces unique risks like volatility decay.