An investment manager has plans for a new type of exchange traded fund (ETF) that may give Speed Racer a run for his torque.
Direxion Funds has proposed the first turbocharged portfolio, that includes an ETF designed to give triple the daily return of some mainstream stock indexes. Whatever goes up, also comes down, so these funds would also triple potential losses as well.
John Spence for The Wall Street Journal looks a little closer at these funds.
He reports that these funds would track popular U.S. benchmarks such as the S&P 500, Dow Jones industrial average and the NASDAQ. Word has it that Direxion also has plans for proposed bearish ETFs that would provide identical leverage in the opposite direction. The firm also plans to go international eventually, to places such as Japan, Latin America and emerging markets.
This move instantly ups the ante within the leveraged playing field, but these ETFs also takes "leveraged" to entirely new levels. This also raises the controversy of the actual need or use of these funds by individual investors. These special trading strategies can be dangerous and costly if used by an unaware investor. We’re concerned that this may be a case of a little more octane than the average investor needs.
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