This article takes about 5 minutes to read

BULZ Basics and Product Design

BULZ (MicroSectors Solactive FANG & Innovation 3X Leveraged ETN) targets 3x the daily return of the Solactive FANG & Innovation Index. Like FNGU, it is issued by BMO with an identical 0.95% expense ratio. Launched in 2021, it positions itself as an 'expanded version' of FNGU.

While FNGU concentrates on 10 stocks, BULZ holds 15. The additional 5 are innovation-sector companies, providing broader diversification. However, 15 stocks is still highly concentrated compared to the S&P 500's 500 or NASDAQ100's 100, making it a high-risk product regardless.

BULZ shares the ETN structure with FNGU, carrying the same issuer credit risk dependent on BMO's financial health.

Composition Differences from FNGU

Beyond FNGU's 10 stocks (Meta, Apple, Amazon, Netflix, Alphabet, Microsoft, Tesla, NVIDIA, Snowflake, Broadcom), BULZ adds innovation companies such as Twitter (now X), Spotify, Block (formerly Square), Zoom, and Palantir. Constituents are periodically reviewed, so current holdings should be verified on the official site.

With 15 equally weighted stocks, each carries approximately 6.67% weight versus FNGU's 10%. This enhances diversification but also dilutes the benefit of any single stock's surge.

The additional stocks tend to have smaller market capitalizations and higher volatility than FNGU's constituents. Names like Zoom and Palantir can move 10%+ in a single day, pushing overall index volatility higher.

Performance Comparison and Concentration Effects

Since BULZ launched in 2021, long-term comparison data with FNGU is limited. However, during the 2022 bear market, BULZ recorded even steeper declines than FNGU. Many of the additional holdings were high-valuation growth stocks particularly vulnerable to rising rates.

Conversely, in the 2023 recovery, FNGU outperformed BULZ. The AI boom's benefits concentrated in NVIDIA, Meta, and Microsoft, and FNGU's higher weighting per stock (10% each) proved advantageous. BULZ diluted these gains to 6.67% per name.

From a compound interest perspective, higher volatility means greater decay. If BULZ's additional stocks push overall index volatility higher, its long-term decay rate may exceed FNGU's. Diversification reduces risk in unleveraged portfolios, but at 3x leverage, diversification benefits can be offset by increased decay.

The Diversification vs Volatility Decay Tradeoff

In the unleveraged world, adding stocks unconditionally reduces risk. But leveraged products behave differently. Volatility decay increases proportionally to the square of volatility, so unless diversification actually lowers volatility, adding stocks does not improve decay.

Whether BULZ's 15 stocks achieve lower volatility than FNGU's 10 depends on correlation among the additional names. Low correlation would reduce volatility through diversification, mitigating decay. However, since all are technology and innovation stocks, correlations tend to be high.

Empirical data suggests BULZ's base index volatility is roughly equal to or slightly higher than FNGU's. This means the additional stocks are not functioning as true diversification. It confirms the investment principle that 'diversification within the same sector is not real diversification.'

Decision Criteria - Which to Choose

Choose FNGU if you have strong conviction in the FANG+ 10 stocks and can tolerate concentration risk. In environments where specific large-cap tech names lead the market, such as during the AI boom, FNGU's concentration works in your favor.

Choose BULZ if you want broader exposure across the technology and innovation landscape. If you believe the next growth driver will emerge from outside FNGU's 10 names, BULZ is better positioned to capture it. However, as noted, diversification benefits are limited.

Practically, liquidity differences matter. FNGU has vastly higher volume and tighter bid-ask spreads than BULZ. For short-term trading where transaction costs accumulate, FNGU's superior liquidity is advantageous.

Does Holding Both Make Sense?

There is almost no rational case for holding FNGU and BULZ simultaneously. Their constituents largely overlap since all 10 FNGU stocks are also in BULZ. Holding both effectively overweights FNGU's constituents while allocating a small amount to the additional 5 names.

If you want to dilute FNGU's concentration, simply hold BULZ alone. If you want maximum concentration, FNGU alone suffices. A hybrid position adds management complexity without commensurate benefit.

A more worthwhile consideration is combining FNGU (or BULZ) with TQQQ. TQQQ diversifies across 100 stocks, so while correlation with FNGU is high, the degree of intra-sector diversification differs. Technology investing books on Amazon can help deepen your analysis of individual holdings.

BULZ Investment Summary and Caveats

BULZ launched as an 'improved version' of FNGU but is not necessarily superior. Whether additional stocks function as diversification depends on correlation structure, and within the technology sector, diversification is limited.

A rational approach is to first consider whether TQQQ suffices, then FNGU if you want more concentration, and finally BULZ if you want broader innovation coverage. This stepwise evaluation prevents unnecessary complexity.

Both products share the ETN structure and issuer risk. Leverage times concentration times credit risk creates a triple-risk profile. Understanding all three and strictly managing position size is essential.