Newsletter 70: How I Turned $5,000 Into More Buying Power with Leveraged ETFs
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When I first started investing seriously, I had a small portfolio of about $5,000. Back then, SPY (the S&P 500 ETF) was trading at around $500 per share. That meant I could only buy about 10 shares.
It felt limiting — I wanted more exposure to the market’s growth without waiting years to build up more capital. That’s when I discovered leveraged ETFs.
Why Leveraged ETFs Caught My Eye
Leveraged ETFs are designed to magnify daily returns of an index like the S&P 500 by 2x or even 3x.
- Instead of my 10 SPY shares creeping up slowly, a 3x leveraged ETF could triple the daily move.
- This gave me the chance to grow my small portfolio faster, while still tracking the market.
- I didn’t need to pick individual stocks or guess the “next Tesla.”
It felt like the perfect solution for someone starting small.
🏦 SPY Leveraged ETFs: Real-World Examples
SPY is the most famous ETF tracking the S&P 500. Leveraged SPY ETFs let you supercharge exposure to America’s 500 largest companies. I went into stockanalysis.com and did a comparison to show you. These are among the most popular leveraged ETFs in the market — often used by both retail traders and pros.
Figure 1: Comparison of SPY and its leverage ETFs
These ETFs let you use “built-in leverage” without opening a margin account. Instead of borrowing money from a broker, the fund itself handles the leverage. For small investors like me back then, this was a game-changer.
⚠️ The Downside You Must Respect
As powerful as they are, leveraged ETFs come with serious risks:
- Volatility decay → In choppy markets, compounding drags performance.
- High fees → Expense ratios near 1% (vs ~0.09% for normal ETFs).
- Short-term focus → Not designed for long-term buy & hold.
- Liquidity risks → Smaller funds can be harder to trade.
👉 Example: If SPY drops –10% one day, a 2x ETF drops –20%. Even if SPY rebounds the next day, the ETF may not recover fully because of compounding.
If you would like to learn more about accelerating your investment, find out more from Eric Seto.
🧾 Final Takeaway
Leveraged ETFs — especially SPY leveraged ETFs — are like financial jet fuel. They can take you further, faster… but they burn hot and can explode if mishandled.
I’ve used them successfully for quick gains, but they demand respect and careful timing.
👉 In the next issue, I’ll cover inverse leveraged ETFs — the ones designed to profit when markets fall. Stay tuned!
Stay sharp, stay spiky — be the hedgehog with a strategy
— Mindy
Founder, Hedgehog Huddle
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