3x ETFs Gaining More Fans; Financial Bull Favored

Leveraged ETFs continue to gain fans as investors use them to profit off of volatility, one thing that there's been plenty of in this tough market.

The "3x" ETFs offered by fund management firm Direxion have quickly become the vehicle of choice for the most aggressive traders. The 16 ETFs the firm has launched over the last few months offer three times the upside (or downside) of the underlying indexes.

Critics have raised concerns about individual investors exposing themselves to the levels of volatility (and potential losses) that come with these ETFs. The Wall Street Journal recently ran a cautious story that warned, "Their returns are predictable relative to the index only if you own them for one day or less. Over longer periods, say a week or more, these funds can wander wildly away from the underlying index."

Direxion itself echos these comments on its own website, where it says, "Because Direxion Share ETFs seek daily investment goals, the Funds are not appropriate for 'Buy and Hold' strategies, especially in volatile markets." Proponents of the ETFs, meanwhile, point out that they allow investors to hedge portfolios with far less capital.

A look at stock tracking trends on tickerspy.com gives a sense of which of the 16 3x ETFs investors are finding most useful. While the aggregate numbers aren't large (these ETFs are still quite new), it's clear that a handful of these ETFs have garnered a lot of interest with investors.

The Financial Bull 3x (NYSE: FAS - News), which seeks to achieve 300% of the price performance of the Russell 1000 Financial Services Index, has the largest following among tickerspy.com members. Other popular 3x ETFs include the Financial Bear 3x (NYSE: FAZ - News), the Small Cap Bull 3x (NYSE: TNA - News), the Small Cap Bear 3x (NYSE: TZA - News), the Large Cap Bull 3x (NYSE: BGU - News), the Large Cap Bear 3x (NYSE: BGZ - News), the Energy Bull 3x (NYSE: ERX - News), and the Energy Bear 3x (NYSE: ERY - News).

It's also worth noting that a 3x ETF turned up among the top holdings of a Pro portfolio for the first time at the end of 2008. Hedge fund Wagonhound Investments reported an 87,400-share stake in the Small Cap Bull 3x ETF. The rest of Wagonhound's top stocks and a chart of their combined performance are available at tickerspy.com. Wagonhound's top U.S.-listed equity holding at the end of 2008 was in specialty insurance firm Allied World Assurance Holdings (NYSE: AWH - News)

http://finance.yahoo.com/news/3x-ETFs-Gaining-More-Fans-indie-14524941.html

I play investopedia. So far FAZ has been kicking FAS's ass. I know because I keep buying FAS and losing. But I loaded up again today because it HAS to turn around sometime. lol