Leveraged single-stock ETFs are here; reasons why long-term investors should stay away
Financial companies are getting more creative in finding ways to help you YOLO your money.
America just got its first leveraged single-stock ETFs. Yesterday, AXS Investments launched eight different single-stock inverse or leveraged ETFs, including:
- AXS 2X NKE Bear Daily ETF (NASDAQ:NKEQ) — aims for 2x the return of Nike (NYSE:NKE).
- AXS 1.5X PYPL Bull Daily ETF (NASDAQ:PYPT) — aims for 1.5x the return of PayPal (NASDAQ:PYPL).
Want to bet against Tesla? There’s the AXS TSLA Bear Daily ETF (NASDAQ:TSLQ). See others here.
BEWARE: Leverage can blow up portfolios, use at your own risk.
- Leverage works wonders on the way up. Why get 1x return when you can get three times the amount? But when prices drop, the losses are also amplified.
- They’re not meant to be long-term “set it and forget it” investments. In a sideways market, leveraged ETFs can, in theory, perform even worse.
The SEC warned of the risks of these productions, but they were approved regardless. The funds also carry a high 1.15% expense fee.
Leveraged ETFs have grown in popularity — doubling in assets in 2020. Direxion is one of the most popular leveraged ETF providers — offering various sector-focused leveraged ETFs.
The real degen question: When is the AMC 3x-leveraged ETF coming?