Want more Nvidia? Investors try funds that double its return—and risk

livemint.com:

The 2024 stock market rally has some everyday investors looking to ratchet up the risk. Thrill-seeking investors are turning to single-stock exchange-traded funds, a relatively new product that aims to amplify the return of one stock using borrowed money or derivative contracts. For example, investors who aren’t satisfied with Nvidia’s 80% advance year-to-date can turn to the T-Rex 2X Long Nvidia Daily Target ETF, which aims to double the daily return of the graphics-chip maker.

The fund, which is available through most major brokerage accounts, is up 191%. Similar ETFs let investors make leveraged or inverse bets on volatile stocks such as Tesla and cryptocurrency exchange Coinbase Global. First approved by the Securities and Exchange Commission in 2022, single-stock ETFs were initially slow to catch on.

But they are surging in popularity this year, with assets more than doubling to $7.1 billion in the first quarter. The biggest single-stock ETF, a 2x long Nvidia fund from GraniteShares, has posted more than $1 billion in inflows in 2024 and is approaching $2 billion in total assets. Proponents of the funds say they are a tool that allows regular investors to employ strategies long used by Wall Street.

Critics need to point no further than the first-quarter performance of the T-Rex 2x Inverse Nvidia Daily Target ETF: negative 77%. “This is speculative investing like nothing else," said Todd Rosenbluth, head of research at data provider VettaFi. The asset managers that offer single-stock funds say they are meant to be used as short-term trading vehicles and aren’t appropriate for investors who don’t plan to actively manage their portfolios.