It provides equal-weighted exposure to the 10 big tech and growth stocks that make up the NYSE FANG+ Index and tracks 3x the index's daily return. Because it is built on derivative contracts, it does not hold the underlying stocks.

It suits experienced investors who want short-term directional trades on the big tech sector or a tactical leveraged position.

Launched by Bank of Montreal in 2018, it is described as an actively managed product.

The product holds 10 technology and growth stocks included in the NYSE FANG+ Index (Facebook, Apple, Amazon, Netflix, Alphabet, Nvidia, Tesla and others) at equal weights, and targets 3x the daily return through derivative contracts. Because compounding can cause returns to diverge over longer holding periods, the product is designed for short-term trading.

• Concentrated, equal-weighted exposure to the 10 FANG+ stocks
• ETN structure achieves the daily leverage target without tracking error

Assets under management (AUM) stand at $2.1B, and the Expense Ratio is 0.35% per year.

Unlike the similar leveraged product TQQQ (3x Nasdaq 100), FNGU concentrates on just the 10 FANG+ Index stocks, resulting in lower diversification and higher volatility. In addition, because it is an ETN rather than an ETF, it carries the added credit risk of its issuer, Bank of Montreal.

When the market is rising on big tech leadership, the leverage effect produces substantial outperformance versus the index; conversely, losses are also magnified in downturns. Returns tend to swing noticeably depending on the earnings of FANG+ constituents and the interest rate trend.

Leverage-seeking capital tends to concentrate when expectations for big tech growth are high. During rate-hike phases, valuation pressure on growth stocks can lead to outflows, and when market volatility rises, short-term money sometimes exits over concerns about compounding losses.

Short-term leveraged exposure to big tech is its strength, but compounding losses, ETN credit risk, and high volatility are the main risk factors.

As shown in the table, TQQQ is a 3x leveraged ETF on the Nasdaq 100 Index with greater diversification and a larger asset base than FNGU, while SOXL is a 3x leveraged ETF specialized in the semiconductor sector. For a lower leverage multiple, QLD (2x Nasdaq 100) or SSO (2x S&P 500) are alternatives, and for 3x S&P 500 exposure, SPXL is also worth considering. If you want exposure to the FANG+ Index without leverage, compare the non-leveraged version FNGS, and if you need an inverse position on FANG+, FNGD is worth comparing as well.

These are the key points to verify before investing in FNGU. Thoroughly review the credit risk and compounding loss risk stemming from the high leverage and ETN characteristics before deciding whether to enter.

FNGU carries at once the compounding loss risk from daily leverage resets, high volatility from concentration in 10 FANG+ stocks, and the credit risk of its ETN issuer, Bank of Montreal. Holding it long term can lead to a loss of principal.

It is a suitable tool for experienced investors who want a short-term tactical leveraged position in big tech. It is unsuitable for long-term investing or as a core holding in a diversified portfolio, and it should always be used with full awareness of compounding losses and ETN credit risk.