There's now a juiced-up way to get 4 times the return of the S&P 500 — but it comes with many risks (2024)

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There's now a juiced-up way to get 4 times the return of the S&P 500 — but it comes with many risks? ›

There's now a juiced-up way to get 4 times the return of the S&P 500 — but it comes with many risks. Bank of Montreal launched the Max SPX 500 4x leveraged ETNs, which tracks four times the total return of the S&P 500.

Long holding period risk - The 4x ETNs are intended to be daily trading tools for sophisticated investors and are designed to reflect a leveraged long exposure to the performance of the Index on a daily basis; however, their returns over different periods of time can, and most likely will, differ significantly from ...

Once you've opened an investment account, you'll need to decide: Do you want to invest in individual stocks included in the S&P 500 or a fund that is representative of most of the index? Investing in an S&P 500 fund can instantly diversify your portfolio and is generally considered less risky.

It's safe to buy stocks, but the market environment warrants caution. To summarize, the S&P 500 moved much higher over the past year, and the index currently trades at a material premium to its historical valuation. Even so, Buffett continued to buy stocks throughout the year, including during the fourth quarter.

Stock Market Average Yearly Return for the Last 50 Years

The average yearly return of the S&P 500 is 11.35% over the last 50 years, as of the end of April 2024. This assumes dividends are reinvested.

Funds that offer 3x leverage are particularly risky because they require higher leverage to achieve their returns.

Because they rebalance daily, leveraged ETFs usually never lose all of their value. They can, however, fall toward zero over time. If a leveraged ETF approaches zero, its manager typically liquidates its assets and pays out all remaining holders in cash.

Over the past decade, you would have done even better, as the S&P 500 posted an average annual return of a whopping 12.68%. Here's how much your account balance would be now if you were invested over the past 10 years: $1,000 would grow to $3,300. $5,000 would grow to $16,498.

In 1980, had you invested a mere $1,000 in what went on to become the top-performing stock of S&P 500 (^GSPC 0.12%), then you would be sitting on a cool $1.2 million today. That equates to a total return of 120,936%. The stock? None other than Gap (GPS -0.73%).

Can an S&P 500 index fund investor lose all their money? Anything is possible, of course, but it's highly unlikely. For an S&P 500 investor to lose all of their money, every stock in the 500 company index would have to crash to zero.

Why you shouldn't just invest in the S&P 500? ›

That's because your investment gives you access to the broad stock market. Meanwhile, if you only invest in S&P 500 ETFs, you won't beat the broad market. Rather, you can expect your portfolio's performance to be in line with that of the broad market.

If you are a cost-conscious investor, the VOO, IVV, and SPLG might make a more attractive option compared to SPY with their lower expense ratios. Conversely, you might appreciate the higher liquidity of SPY if you're an active or institutional trader.

Is Investing in the S&P 500 Less Risky Than Buying a Single Stock? Generally, yes. The S&P 500 is considered well-diversified by sector, which means it includes stocks in all major areas, including technology and consumer discretionary—meaning declines in some sectors may be offset by gains in other sectors.

S&P 500: $100 in 1980 → $13,719.04 in 2024

This lump-sum investment beats inflation during this period for an inflation-adjusted return of about 3,505.34% cumulatively, or 8.42% per year. If you used dollar-cost averaging (monthly) instead of a lump-sum investment, you'd have $11,799.89.

The S&P 500 is an index, so it does not pay dividends; however, there are mutual funds and exchange-traded funds (ETFs) that track the index, which you can invest in. If the companies in these funds pay dividends, you'll receive yours based on how many shares of the funds you hold.

It is called the MAX S&P 500 4X Leveraged Exchange Traded Note XXXX, and it will offer investors daily returns four times that of the S&P 500 Total Return Index. The fund's sponsor, Max ETNs, already offers four other leveraged ETNs offering 3X exposure to the airline and auto industries.

These leveraged ETFs seek a return that is 300% or -300% of the return of their benchmark index for a single day. The funds should not be expected to provide three times or negative three times the return of the benchmark's cumulative return for periods greater than a day.

S&P Leveraged Indices are designed to generate a multiple of the underlying index return, minus the cost of borrowing capital to generate excess index exposure. The S&P 500 2X Leverage Daily reflects 200% of the return (positive or negative) of the S&P 500® including dividends and price movements.

Daily leveraged exposure means the compounding effect will be amplified and occur daily, which can have a positive or negative effect on returns over longer periods. If the FTSE 100 price is £100 and rises by 1%, the Boost FTSE 100 3x Leverage Daily ETP (3UKL) will rise by 3% to £103 (excluding fees & adjustments).