December 12, 2015
Dear US Securities & Exchange Commission,
I would like to provide some input on leveraged ETFs used by retail investors.
I am AGAINST the idea of banning 3x bull ETFs provided by Direxion ETFs.
I am a retail investor who has successfully owned leveraged ETFs that track underlying indexes in the technology, healthcare, financial services and semiconductor industries.
The list of ETFs that track their underlying indexes and those I have done very well in are in blue below.
TECL – Direxion Technology 3x Bull (tracking Technology Select Sector SPDR® Fund -- XLK)
CURE - Direxion Healthcare 3x Bull (tracking Health Care Select Sector SPDR® Fund – XLV)
FAS – Direxion Daily Financial Bull 3x (tracking Russell 1000 Financial Services Index)
SOXL – Direxion Daily Semiconductor Bull 3x (tracking the Philadelphia Semiconductor Index – SOX)
Take for example the TECL. It is easy for a retail investor to understand he/she is gaining exposure to 3x the daily performance of the XLK ETF which owns good blue-chip companies like Apple, Google, Microsoft, Verizon, Visa, Cisco, IBM, etc.
The CURE ETF provides 3 times exposure to good blue-chip healthcare companies e.g. Johnson & Johnson, Pfizer, Gilead Sciences, Allergan, Amgen, Merck, Bristol Myers, etc.
Just because I (retail investor) am doing well owning technology, healthcare and financial services 3x ETFs does NOT mean you will punish me by banning such EXCELLENT ETFs.
What retail investors need is education and disclosure when they attempt to buy such securities. The level of risk is high; and most investors should be informed that if they do NOT understand what they are buying, they should STAY AWAY!
You should NOT punish me for trying to enhance my returns using good ETFs that I understand and know how to invest in. Most ETFs offered by big players like Blackrock and iShares offer very paltry returns over a 5 to 10 year period; they are not enough for a retail investor to accumulate enough wealth to retire comfortably.
The SEC should ban leveraged ETFs in the junk bonds, commodity/natural gas and other “volatility ETFs” that are extremely hard to understand. However, leveraged ETFs that track solid underlying SPDR index such as the Technology, Healthcare, Financials, Semiconductor, Mid-Caps and Small caps should be allowed to trade freely on the markets.