The current credit market is starting to rise again, investors are pulling their capital back and seeking for safety assets like government bonds, hedge funds are facing redemptions, global force liquidation is going on, deflation remains to choke the current financial system and global central banks are panicked.
Triple inverse funds offer an alternative to provide extra gains in the uncertain markets situation. We may consider Direxion Financial Bear 3X (FAZ) as a hedge.
The Russell 1000® Financial Services Index is a capitalization-weighted index of companies that provide financial services. As of April 30, 2008, the Index had 227 components, derived from the Russell 1000 Index with an average market capitalization of over $11 billion dollars and a median market capitalization of $4.4 billion dollars. One cannot directly invest in an Index.
The Direxion Financial Bear 3X - Triple-Leveraged ETF is designed to yield investment results approximately equivalent to triple (300%) the inverse of the return of an investment in the Russell 1000 Financials Index, which tracks financial-related securities in the Russell 1000 Index. For example, if the underlying index gains 1%, this fund should decline in value approximately 3%.
Index Sector Weightings :
Diversified Financial Services 21.38%The Fund seeks to create short positions by investing at least 80% of its net assets in Financial Instruments that provide leveraged and unleveraged exposure to the Financial Index.
Real Estate Investment Trusts 11.34%
Insurance: Multi-Line 10.07%
Financial Data & Systems 5.81%
Insurance: Property-Casualty 4.00%
Securities Brokerage & Service 3.85%
Asset Mmgnt. & Custodian 2.31%
Insurance: Life 2.15%
Consumer Lending 1.57%
Banks: Svgs Thrift & Mort. Lend. 1.53%
Commercial Fin. & Mort. Co. 0.95%
Real Estate 0.29%
Data as of 9/30/2008 is subject to change at any time.
Source: Direxion
FAZ launched on November 3, along with the other seven Triple-Leveraged ETFs by Direxion, a pioneer in providing alternative investment strategies to sophisticated investors. Those funds began to trade on November 5, 2008.
- Bullish :
ERX - Energy Bull 3X - 3x the Russell 1000 Energy index.
FAS - Financial Bull 3X - 3x the Russell 1000 Financial Index.
BGU - Large Cap Bull 3X - 3x the Russell 1000 Index.
TNA - Small Cap Bull 3X - 3x the Russell 2000 Index.
Bearish :
ERY - Energy Bear 3X - 3x inverse the Russell 1000 Energy index.
FAZ - Financial Bear 3X - 3x inverse the Russell 1000 Financial Index.
BGZ - Large Cap Bear 3x - 3x inverse the Russell 1000 index.
TZA - Small Cap Bear 3X - 3x inverse the Russell 2000 index.
It’s actually an innovative funds Benchmarked to help advisors and investors seeking to outperform major Russell Indexes in bull and bear markets
But No Risk No Gain, however investors should be aware there are some risks to these instruments, and they should know and understand them before rushing out to buy. Because they are triple-levered, so if the index drops 15% in one year and everything works out the way it should, your bull ETF will drop 42.62%, according to the prospectus. The estimated return is based on the volatility of the underlying index, so it may vary. If you own the Bear shares, and the index drops 50% over one year, your return could vary anywhere from 33% to 679%. (Investopedia Community)
Related Posts :
Sources :
- Stock Encyclopedia: The ETF: Financial Bear 3X - Triple-Leveraged ETF (FAZ)
- Direxion: Financial Bear 3x Shares (FAZ)
- Stock Rake: 3x Triple Leveraged ETFs, November 13, 2008
- Marketwire: Direxion Launches Eight New Leveraged ETFs, November 3, 2008
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