TQQQ Delivers Larger Gains Than SSO, but It Comes With Increased Risk and Volatility

The ProShares - UltraPro QQQ ETF (TQQQ 7.15%) stands out for its aggressive 3x leverage and tech focus, while the ProShares - Ultra S&P 500 ETF (SSO 3.07%) applies 2x leverage to the S&P 500 with lower fees and broader sector coverage.

Both funds are designed for tactical traders seeking amplified exposure to major U.S. equity indexes. SSO tracks the S&P 500, appealing to those wanting broad market exposure, while TQQQ targets the Nasdaq-100, making it a favorite for those chasing outsized tech-driven moves.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

TQQQ charges a slightly lower expense ratio, and it also offers a marginally higher dividend yield. The cost gap may matter for longer holding periods, though both funds are typically used for short-term trades.

Performance & risk comparison

What's inside

TQQQ amplifies exposure to the Nasdaq-100, resulting in a portfolio that is 54% allocated to technology, 17% to communication services, and 13% to consumer cyclical.

With 101 holdings, its top allocations include Nvidia, Apple, and Microsoft. The daily leverage reset is a key quirk, making TQQQ especially sensitive to volatility and best suited for short holding periods.

SSO, in contrast, tracks the S&P 500 with 2x leverage, spreading risk across 503 holdings. Compared to TQQQ, it's less tilted toward technology at 35%, with other allocations toward financials at 14% and consumer cyclical at 11%.

Its top positions -- Nvidia, Apple, and Microsoft -- mirror the index but with slightly less tech concentration than TQQQ. Both funds’ leverage resets daily, which can erode returns in volatile, sideways markets.

For more guidance on ETF investing, check out the full guide at this link.

Foolish take

Leveraged ETFs like TQQQ and SSO can experience enormous returns when their underlying indexes are thriving, but that leverage can also result in significant drawdowns during periods of volatility.

Between these two funds, SSO is the less risky. With only 2x leverage compared to TQQQ's 3x leverage, you may see lower earnings -- as evidenced by its diminished one- and five-year total returns. However, with a lower beta and significantly less severe max drawdown, SSO has experienced far less price volatility than TQQQ.

Both of these funds perform best as short-term investment vehicles for experienced traders, as holding leveraged ETFs for more than a few days increases the risk of volatility.

Glossary

Leverage: The use of borrowed funds or derivatives to amplify the returns of an investment.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Nasdaq-100: An index of 100 of the largest non-financial companies listed on the Nasdaq stock exchange.
S&P 500: A stock market index tracking 500 large U.S. companies across various sectors.
Beta: A measure of an investment's volatility compared to the overall market, typically the S&P 500.
AUM (Assets Under Management): The total market value of assets that a fund manages on behalf of investors.
Max drawdown: The largest observed loss from a fund's peak value to its lowest point over a specified period.
Dividend yield: The annual dividend income expressed as a percentage of the investment's price.
Swaps: Financial contracts where two parties exchange cash flows or returns, often used by funds to achieve leverage.
Derivatives: Financial instruments whose value is based on the price of underlying assets, such as stocks or indexes.
Daily leverage reset: The process by which leveraged funds adjust their exposure each day to maintain a set leverage ratio.
Growth of $1,000 over 5 years: The total value a $1,000 investment would reach after five years, including all gains and losses.