Experts sound the alarm over wildly popular ETF that can quickly 2X your money. And it’s a risk you must know (even if you don’t own it)

Unlike ETFs that manage large pools of assets, single-stock ETFs focus on a single company, but that’s not all. To amp up volatility, these higher-risk ETFs often use leverage and advanced products like swaps to double returns — or losses.

Although there are now hundreds of single-stock ETFs available in standard brokerage accounts, potential investors should understand how these funds operate and why they differ from standard ETF offerings.

The dangerous allure of single-stock ETFs

Single-stock ETFs have only been around since 2022 when AXS Investments first got the green light from the U.S. Securities and Exchange Commission. Since then, more financial firms have added single-stock ETFs to their offerings, with over 200 launched in 2025 alone (1).

Typically, these single-stock ETFs track big companies like Tesla or Nvidia and offer investors double the exposure to the stock’s daily price movements. So, if Tesla goes up by 2% on any given day, someone holding its single-stock ETF will see a 4% rise.

That’s good news when the market moves in a favorable direction, but it also makes it really easy to lose money on bad days.

Although single-stock ETFs offer double the exposure today, plenty of firms are trying to increase this volatility, with some proposals aiming to offer products with upwards of five times the exposure (2).

The obvious attraction for single-stock ETFs is the potential for higher gains. When someone believes a stock is about to go up in the near term, loading up on single-stock ETFs will make them more money, but that’s only if said investor is correct.

This is particularly true during earnings season when stocks are extra volatile after companies release their respective reports. Unsurprisingly, Mo Sparks from the leveraged ETF firm Direxion told Barron’s that he sees the most “elevated activity” for single-stock ETFs during this time (3).

Another reason single-stock ETFs are so hot nowadays is their increasing accessibility. Without single-stock ETFs, traders need special privileges to access margin or exotic financial instruments to take on a position. By contrast, single-stock ETFs trade like other shares on a brokerage account.

There’s also the potential to customize single-stock ETFs for different strategies. Some of these products are called “inverse” ETFs, meaning the investor profits when a company goes down. That may be useful if someone wants to bet against a company without opening a short position.

Although these features are convenient for some short-term scenarios, they go against all the tenets of long-term investing. First, these products are concentrated in one investment rather than offering lower-risk diversified exposure. Second, single-stock ETFs use high-risk strategies to deliver higher returns, which puts traders at greater risk of losing their funds.

There’s even preliminary research that single-stock ETFs perform worse than their underlying stocks over the long term. The American Association of Individual Investors notes that single-stock ETFs generally outperform the underlying stock for only one day (4).

Safety guidelines for single-stock ETFs

Single-stock ETFs are short-term trading vehicles, not long-term investments.

Not only are single-stock ETFs more volatile than diversified funds, they have features that limit their long-term growth. For instance, firms that manage these ETFs recalculate their leverage daily through “daily resets,” so their returns reflect the day’s performance rather than cumulative performance over multiple days. Over time, these daily rebalancing efforts could lead to “volatility drag,” where the ETF loses value relative to the stock (5).