Investors who are looking to ratchet up the risk are turning to single-stock exchange-traded funds, a relatively recent product that focuses on amplifying the return of one stock by using borrowed money or derivative contracts, writes Jack Pitcher for The Wall Street Journal.

For example, if investors are not satisfied with the 80 percent year-to-date advance recorded by Nvidia, they can now turn to the T-Rex 2X Long Nvidia Daily Target ETF. This single-stock ETF has the goal of doubling the daily return of the technology company. The fund is available through many brokerage accounts and is up 191 percent.

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Similar single-stock ETFs make it possible for investors to make leveraged or inverse bets on more volatile stocks, including Tesla and Coinbase Global.

Single-stock ETFs were originally approved by the Securities and Exchange Commission two years ago. They were slow to catch on at the start, but they are now surging in popularity, with assets more than doubling in the first quarter to $7.1 billion.

A 2X Long Nvidia fund from GraniteShares, currently the biggest single-stock ETF, has posted more than $1 billion in inflows this year so far and is nearing $2 billion in total assets.

While the proponents of these funds describe them as a tool that makes it possible for regular investors to employ strategies long used by Wall Street, the critics are quick to point to the negative 77 percent performance the 2X Long Nvidia fund recorded in the first quarter.

“This is speculative investing like nothing else,” said Todd Rosenbluth, head of research at data provider VettaFi.

According to asset managers that offer single-stock ETFs, they are supposed to be used as short-term trading vehicles and should not be used by investors who do not plan to manage their portfolios actively, as they produce their expected result daily.

“As if investing in stocks isn’t risky enough, these investments will increase the risk of a portfolio and, if you are right, increase the returns,” said Fred Hubler, CEO and Chief Wealth Strategist at Creative Capital Wealth Management Group in Chester Springs. “It almost is too little too late, and by the time an ETF is created to reflect an individual stock, that stock’s run may be over.”

Hubler is not a fan of increasing risk on an equity that is already risky.

“We are not risk-averse; we just like the risk returns of non-stock market options like private equity or energy,” he said. “These have less risk than a leveraged single company ETF.”

Read more about single-stock exchange-traded funds in The Wall Street Journal.

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