The Direxion Daily Semiconductor Bull 3X Shares (NYSEARCA: SOXL) and the ProShares Ultra S&P500 (NYSEARCA: SSO) both aim to provide outsized returns through the use of considerable leverage. However, their approach to delivering these returns vary greatly. SOXL is laser-focused on the red-hot semiconductor sector, while SSO aims to double the daily return of the benchmark S&P 500 index.

What follows is an in-depth breakdown of each fund, along with some guidance for long-term investors.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

Both funds come with relatively high expense ratios, so cost is not necessarily a deciding factor. SSO’s yield is more than double that of SOXL, which may appeal to those who value a higher payout alongside leveraged exposure.

Performance & Risk Comparison

What's Inside

SOXL is a highly concentrated bet, allocating 100% to technology—specifically semiconductors—with just 44 holdings. Its largest positions include Broadcom (AVGO 4.31%), Advanced Micro Devices (AMD +1.02%), and Nvidia (NVDA +1.50%), each representing a tiny slice of assets. The fund’s 15.7-year track record and daily leverage reset mean outsized swings, especially in volatile markets.

SSO, by contrast, mirrors the S&P 500 with over 500 holdings spanning technology, financials, and other sectors. Its top weightings—Nvidia, Apple (AAPL +1.52%), and Microsoft (MSFT 1.07%)—are similar to the index, but the fund’s daily leverage reset can still sharply amplify market moves up or down.

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

Foolish Take

For starters, let's recap. The key difference between ProShares - Ultra S&P500 (SSO) and Direxion Daily Semiconductor Bull 3X Shares (SOXL) lies in SOXL’s intense sector focus and higher leverage, which amplifies both potential gains and losses compared to SSO’s diversified but still leveraged exposure.

Both SSO and SOXL are leveraged exchange-traded funds aiming for magnified daily returns, but SSO tracks the S&P 500 at 2x leverage, offering broad market exposure, while SOXL targets 3x the daily return of semiconductor stocks for those seeking aggressive sector bets.

In both cases, however, the funds' significant leverage comes at a big cost. And for many investors, that should place each of these funds beyond their reach. Consider the recent drawdowns for each ETF: Over the last five years, SSO experienced a drawdown of 46%; SOXL crashed by more than 90%. In other words, these ETFs are enormously volatile -- meaning they are not for the faint of heart.

Even more importantly, they're not designed as long-term investments. SOXL, for example, has generated a five-year total return of 57%. However, a similar, non-leveraged ETF that tracks semiconductor stocks, the iShares Semiconductor ETF (SOXX), has logged a total return of 157% over the same period. The lesson? There's a huge cost to all that leverage -- particularly if held for a long time.

And while the SSO has performed better -- it has delivered a five-year return of 180% versus a 104% return for the S&P 500 -- it still comes up short of delivering a 2x return of the S&P 500.

In summary, the SOXL in particular is designed for short-term traders looking to boost their returns, not for long-term buy-and-hold investors. As for the SSO, it has delivered outsized gains compared to the S&P 500 but comes with much higher volatility -- making it unsuitable for some investors and portfolios.

Glossary

Leveraged exchange-traded fund (ETF): A fund using financial derivatives to amplify daily returns, often by 2x or 3x the underlying index.
Expense ratio: The annual fee, as a percentage of assets, that investors pay to cover a fund’s operating costs.
Dividend yield: Annual dividends paid by a fund or stock, expressed as a percentage of its current price.
Beta: A measure of a fund’s volatility compared to the overall market; higher beta means greater price swings.
Assets under management (AUM): The total market value of all assets managed by a fund.
Max drawdown: The largest observed percentage drop from a fund’s peak value to its lowest point over a specific period.
Daily leverage reset: The process where leveraged ETFs adjust exposure each day to maintain their target leverage ratio.
Sector focus: Concentration of a fund’s investments in a specific industry or segment of the market.
Holdings: The individual stocks or assets that make up a fund’s portfolio.
Total return: The investment’s price change plus all dividends and distributions, assuming those payouts are reinvested.