ETFs Are Growing in Popularity: $FAS and $FAZ
February 17th, 2010 at 10:30 am Posted by
ETFs have recently been considered the new growth sector in the U.S. financial market, becoming especially popular among self-directed investors.
In fact, Cogent Research found that 67% of U.S. investors who own ETFs purchased them with no help from a financial adviser.
So, what is an ETF? ETFs (Exchange Traded Funds) are securities that track an index, commodity or a basket of assets like an index fund. The Dean believes some of the appeal for investors comes from ETFs trading like stocks, experiencing price changes throughout the day as they are bought and sold.
The Dean believes ETFs can be interesting investments but, similar to large cap stocks, may be better suited for well-heeled, seasoned investors.
ETF providers include The Vanguard Group, Claymore, Pacific Investment Management Company, and PowerShares but newbies like Charles Schwab, iShares and Fidelity have seen the growth and recently become involved in the action.
Two of the most popular ETFs are $FAS and $FAZ.
Direxion Daily Financial Bull 3X Shares, otherwise known as (NYSE: FAS), “seeks to replicate, net of expenses, 300% of the daily performance of the Russell 1000 Financial Services index. $FAS is a nondiversified fund, with at least 80% of its assets in securities in the Russell 1000 index.
Direxion Daily Financial Bear 3 (NYSE: FAZ) as its title suggests, has an inverse relationship to $FAS, and the Russell 1000 Financial Services index, and is about a quarter of the price of $FAS.
Some may argue that ETFs are restricting, inactive or have volume too large to be cost effective. But, ETFs are owned by 11% of U.S. investors and have exceeded the trillion dollar level in the past year and The Dean believes it’s probably for good reasons.
