The FAS fund provides 3x leveraged exposure to the financials segment of the S&P 500. It invests in swap agreements, securities, and ETFs that track the index. It rebalances daily. Because the fund is leveraged, its long-term returns are difficult to predict. However, despite its high risk, it may provide an effective hedge to your portfolio.
As yields continue to rise, the financials sector appears attractive. Leveraged plays in this sector can make huge gains in a short period of time. These funds typically charge a fee of around 95 bps. One such leveraged financial 3x ETF is the Direxion Daily Financial Bull 3X ETF. It has amassed $875 million in assets and trades in moderate volume.
Leveraged 3x ETFs track a variety of asset classes and use leverage to gain three times the daily or monthly return of the underlying index. These funds are available in both short-term and long-term versions. It is important to understand how these products work before you invest in them.
Leveraged 3X ETFs are similar to other ETFs. You search for a brokerage that offers the ETF and place a trade order on the ETF ticker symbol. The main difference between leveraged ETFs and regular ETFs is that a leveraged ETF usually invests more in derivatives. This means that it is riskier than holding stocks outright. However, the added leverage helps amplify the volatility of the index.
The Direxion Daily Financial Bull 3X ETF was created by Direxion on November 6, 2008 and invests at least 80% of its net overmogens in financial securities. It is currently one of the highest performing ETFs, according to Morningstar. Its tracking error is only 0.10 percent.
A financial 3x ETF, like any leveraged ETF, carries considerable risk. It should not be used for long-term investing. They are not suitable for all investors. However, they can help you trade stocks in volatile markets. In fact, the risk involved in these ETFs is so high that they are not recommended for beginners.
Leveraged ETFs are best for short-term trading. Leveraged ETFs are rebalanced on a daily basis. It is important to note that leveraged ETFs are not suitable for long-term investors. You should carefully evaluate the risk factors before investing in these ETFs.