The UPRO Beast & Your Pocket Money

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Now, everyone fancies themselves a bit of a wizard when it comes to investing, don’t they? So, when you stumble upon a fund with a name like UltraPro S&P 500 ETF (VOO 0.46%), by a good ten percentage points. But before you go stuffing all your pocket money into this UPRO beast, have a little think. It’s got a trick up its sleeve, and it’s not a bunny rabbit.UPRO 1.43%), it sounds terribly clever, doesn’t it? Like a shortcut to a mountain of gold. Over the last year, it has zoomed past a perfectly respectable S&P 500 index fund, like the Vanguard S&P 500 ETF (

What is this UltraPro Thing, Exactly?

This UltraPro S&P 500 ETF is what they call a “leveraged” ETF. A fancy word for a bit of financial hocus-pocus. The idea is to make three times the return of the S&P 500 each and every day. So, if the S&P 500 wiggles up by one percent, this UPRO thing aims to leap up by three. It uses some rather complicated gizmos and gadgets to achieve this, but the truly important bit is this: it’s only interested in one day. One measly little day.

And the people who make these things aren’t shy about admitting it. Right there on their webpage, in small print, they warn you: “For any holding period other than a day, your return may be higher or lower than the Daily Target. These differences may be significant.” Which, translated from Grown-Up Speak, means “Don’t bother if you plan on holding this thing for more than five minutes.” If you’re a sensible, long-term investor, you need to tread very, very carefully indeed.

A Bit of Simple Sums

Now, let’s think about this. The S&P 500, like a grumpy old badger, goes up and down. It has its good days and its bad days. Secondly, this three-times-the-return business works both ways. If the badger goes down, so does your investment, and then some. And thirdly, there’s the simple matter of mathematics. It’s a frightfully useful thing, mathematics, if you don’t get tangled in the numbers.

Imagine you have a chocolate bar worth ten shillings. It falls to five shillings. That’s a loss of fifty percent, isn’t it? Now, to get back to ten shillings, you don’t need to gain fifty percent. Oh no. You need to gain a hundred percent. That’s the nasty little trick this leveraged business plays on you when the market has a wobble. Have a look at the chart below. It tells the story rather nicely.

The Vanguard S&P 500 ETF, being a sensible sort, rose nearly fifteen percent over the past year. But the UltraPro S&P 500 ETF only managed twenty-six percent. Nowhere near three times the gain, is it? The reason? A rather alarming dip in its share price earlier in the year. A dip that was far, far worse than the one experienced by the Vanguard fund. Leaving the UPRO beast with a rather enormous hole to dig itself out of.

The risk-reward balance with these leveraged ETFs is decidedly lopsided. They freely admit they aren’t likely to deliver those fancy multiples over the long haul. And unless you have a stomach of steel and enjoy the sensation of your investment plummeting during a market downturn, the potential reward simply isn’t worth the pain. It’s a bit like trying to ride a particularly grumpy rhinoceros – thrilling for a moment, perhaps, but ultimately rather disastrous.

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2026-02-28 13:42