Direxion Daily Semiconductor 3x Bull Shares ETF: Risk And Reward Profile Not Attractive (NYSEARCA:SOXL) (2024)

FAQs

Is SOXL high risk? ›

SOXL was first introduced on March 11, 2010, with an annual expense ratio of 0.99%, which is relatively high compared to other ETFs and mutual funds. It is a high-risk, high-reward investment option for investors seeking to amplify their semiconductor sector exposure.

Direxion Daily Semiconductor Bull 3x Shares (SOXL)

SOXL has a dividend yield of 0.46% and paid $0.12 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 21, 2023.

SOXL is a trading vehicle and not a long-term investment, but if traders are looking for short-term bullish leveraged exposure to the semiconductor industry it suits that purpose well.

The SOXL ETF holds buy signals from both short and long-term moving averages giving a positive forecast for the stock.

The inherent structural problem with leveraged ETFs, especially the triple leveraged ETFs, is they're only designed to be held short-term as they only mirror the single-day performance of the underlying asset. To maintain a consistent leverage ratio (2X or 3X), they're rebalanced nightly.

Since they maintain a fixed level of leverage, 3x ETFs eventually face complete collapse if the underlying index declines more than 33% on a single day. Even if none of these potential disasters occur, 3x ETFs have high fees that add up to significant losses in the long run.

The Funds will cease trading on the NYSE Arca, Inc. (“NYSE”) and will be closed to purchase by investors as of the close of regular trading on the NYSE on September 23, 2022 (the “Closing Date”). The Funds will not accept purchase orders after the Closing Date.

Bottom Line. Leveraged ETFs decay due to the compounding effect of daily returns, volatility of the market and the cost of leverage. The volatility drag of leveraged ETFs means that losses in the ETF can be magnified over time and they are not suitable for long-term investments.

Should long term investors avoid ETFs? ›

ETFs are very safe and are an excellent option for long-term investments. According to experts, ETFs are not that volatile and show a slight change in their prices compared to stocks and indices because they are diversified and pooled investments of many investors.

Future price of the stock is predicted at 79.599510459217$ (211.422% ) after a year according to our prediction system. This means that if you invested $100 now, your current investment may be worth 311.422$ on 2024 June 14, Friday.

Semiconductor Bull SOXL share price forecast & targets for Intra Day are 24.46, 24.83, 24.09 on the downside, and 25.82, 26.19, 26.81 on the upside.

SOXX's analyst rating consensus is a Moderate Buy. This is based on the ratings of 415 Wall Streets Analysts.

Broken ETF risk

Most of the time, ETFs work just like they're supposed to: happily tracking their indexes and trading close to net asset value. But sometimes, something in the ETF breaks, and prices can get way out of whack, especially in international markets.

Because leveraged single-stock ETFs in particular amplify the effect of price movements of the underlying individual stocks, investors holding these funds will experience even greater volatility and risk than investors who hold the underlying stock itself.

As with the first example above, a triple-leveraged S&P 500 ETF loses 60% when the underlying index only loses 20%. In some rare cases, particularly when derivatives are used, a leveraged ETF can even lose all or most of its value.

Can You Lose More Money Than You Invested in a Leveraged ETF? No, you cannot lose more money than you invested in a leveraged ETF. This is one of the main reasons why leveraged ETFs are considered less risky than traditional leveraged trading, such as buying on margin or short-selling stocks.

Can you make money with leveraged ETFs? ›

A leveraged inverse ETF uses leverage to make money when the underlying index is declining in value. In other words, an inverse ETF rises while the underlying index is falling, allowing investors to profit from a bearish market or market declines.

Dividend ETFs or Dividend Stocks: Which Is Better? Dividend ETFs can be a good option for investors looking for a low-cost, diversified and reliable source of income from their investments. Dividend stocks may be a better option for investors who prefer to choose their own investments.

Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.

No stock in the S&P 500 has a higher dividend yield than independent oil and gas company Pioneer Natural Resources (PXD).

Direxion said Friday it will close and liquidate seven exchange-traded funds because they were unable to attract sufficient investments. The funds will cease trading on the NYSE Arca and will be closed to purchase by investors as. 23, 2022.

You're forced to sell or take liquidation proceeds, which can create a tax burden or lock in investment losses. You may incur a capital gains tax on profits if the ETF's in a taxable account, that is, a non-retirement account. If you owned the fund less than a year, the profit will be taxed at your normal tax rate.

Direxion Shares ETFs and Direxion Funds are trademarks of Rafferty Asset Management LLC.

How long should I hold my ETF? ›

Holding period:

If you hold ETF shares for one year or less, then gain is short-term capital gain. If you hold ETF shares for more than one year, then gain is long-term capital gain.

There is nothing inherently risky with ETFs in general. However, because they trade like individual stocks, a skilled investor can actually implement investment strategies with added diversification, and therefore decreased risk, when used correctly.

Semiconductor Bull SOXL share price forecast & targets for Intra Day are 24.46, 24.83, 24.09 on the downside, and 25.82, 26.19, 26.81 on the upside.

Because leveraged single-stock ETFs in particular amplify the effect of price movements of the underlying individual stocks, investors holding these funds will experience even greater volatility and risk than investors who hold the underlying stock itself.

Future price of the stock is predicted at 68.649001997842$ (215.918% ) after a year according to our prediction system. This means that if you invested $100 now, your current investment may be worth 315.918$ on 2024 June 07, Friday.