Direxion is one of those mutual fund companies that just doesn't know when to quit. It's been playing around with leveraged and inverse ETFs for a while. Such a bizarre interpretation of a passively managed, low-cost approach to investing was bound to blow up sooner or later. Direxion learned the hard way and is now closing nine of its 3X ETFs. But what exactly did they learn? They still sponsor a large number of leveraged ETFs and have filed registration for six new ones.
These ETFs will of course appeal to investors who don't understand that the daily leverage calculation of these ETFs is a far greater drag on the funds' returns than an expense ratio of "only" 0.75%. A plain vanilla ETF is far cheaper, and risk management with simple options is far more transparent. Firms like Direxion count on investors having a nonexistent learning curve.
Full disclosure: No position in any Direxion products.
These ETFs will of course appeal to investors who don't understand that the daily leverage calculation of these ETFs is a far greater drag on the funds' returns than an expense ratio of "only" 0.75%. A plain vanilla ETF is far cheaper, and risk management with simple options is far more transparent. Firms like Direxion count on investors having a nonexistent learning curve.
Full disclosure: No position in any Direxion products.
