As More Investors Dump Stocks for ETFs, Lever Up with 'HIBL'

More investors are exiting risky stocks and entering ETFs. One way to play the exodus is the Direxion Daily S&P 500 High Beta Bull 3X Shares (HIBL).

With the major indices fluxing up and down as of late, investors could be looking to ETFs to minimize concentration risk. One popular sub-section is funds that track the S&P 500.

“Investors may be selling risky and speculative stocks. But they’re also piling into exchange traded funds, including many that track the S&P 500, at a breakneck pace,” an Investor’s Business Daily article said.

“More than $350 billion of money poured into ETFs this year so far going into May 12, says Todd Rosenbluth, head of ETF and mutual fund research at CFRA. That’s on pace to double the $503 billion in net inflows to ETFs in all of 2020,” the article added.

Traders looking to play the move with leverage can look at HIBL as an option. The fund contains ETFs that track the index.

HIBL seeks daily investment results, before fees and expenses, of 300% of the daily performance of the S&P 500® High Beta Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments that track the index and other financial instruments that provide daily leveraged exposure to the index or to ETFs that track the index.

Traders with a cast iron stomach for leveraged funds have been rewarded with gains of over 700% the past year. The fund is also up over 110% this year.

HIBL Chart

Why the Switch to ETFs?

Other factors driving the move to ETFs include their dynamic ability to trade on major exchanges like stocks.

Additionally, ETFs can offer certain tax advantages. A recent Financial Times article noted that recent research shows that inherent tax advantages make the ETF vehicle most appealing.

“A shift in US investor flows away from mutual funds towards exchange traded funds is being driven primarily by a tax loophole, rather than any inherent advantage of the ETF structure, a team of academics has concluded,” the article explained. “In the past decade, US investors have pulled $1tn from actively managed US mutual funds, with a similar amount flowing into ETFs.”

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