I have been impressed by Direxion’s entry into the ETF space. Although they have focused on the leveraged and inverse side only, their traction has been considerable. This is primarily due to the 3X innovation they brought to market. Indeed, Direxion successfully outmaneuvered veteran leveraged and inverse player Rydex, by carving out a competitive business to segment leader ProShares, whereas Rydex could not. Besides the vision and innovation attached to Direxion, I believe Direxion has the leading voice of leveraged and inverse ETFs, Direxion President Dan O’Neill. His focused, well-spoken message and engaging demeanor has positively set apart Direxion’s brand and educational efforts. With all that being said, I have been anticipating Direxion’s move into the traditional ETF space. Today Direxion launched their first 1X ETF, FLYX, an ETF tracking the NYSE Arca Airline Index and surprisingly I find myself confused and disappointed. Here’s why… Continue Reading
Leveraged ETFs…these two words will evoke passionate debate at any investment gathering! Many investors are split about whether these products are a trick by ETF providers or a treat. The truth is that leveraged ETFs aren’t that different from most consumer products. As long as you follow the directions and don’t misuse the product, the results will be consistent and as advertised.
Unfortunately, leveraged ETFs aren’t the most intuitive product for investors to use right out of the box. They take some reading, explaining and in some cases mathematical tutoring. However, once you understand concepts like compounding, volatility and magnification, leveraged ETFs are actually quite mundane. Here are a few tips to keep leveraged ETFs from turning into tricks on your portfolio. Continue Reading
I was pleased to co chair the ETF 360 Conference on October 21st in New York. It was hosted by Financial Planning, On Wall Street and Bank Investment Consultant magazines and was geared toward financial advisors. This conference had an outstanding list of contributing speakers as well as informed financial advisors in the audience. Perhaps that’s why the event was sold out. Here are some of the highlights of the conference: Continue Reading
Imagine you believe the market is due for a correction and thus you implement short positions. Specifically, you short individual companies in a few sectors — a tech or agriculture name for example. The very next day you find out that these names, Potash and 3Par for example, are now buyout targets by cash heavy corporations. (both of the aforementioned firms are currently in the midst of bidding wars) These two stocks explode upward in price, at the same time lifting similar companies in the industry. Those shorts would be very costly to unwind and certainly give you pause the next time you want to short individual names, right? Continue Reading