Short-term investors and traders can now easily make leveraged bets on individual stocks, thanks to the advent of single-stock ETFs. The Securities and Exchange Commission approved single-share products this week, giving US investors access to products similar to the single-share instruments that have traded in Europe for many years. five. This new market segment seems poised to grow rapidly. AXS Investments launched eight new funds this week, including funds that bet on a single stock or are designed to deliver multiple returns. There are more funds from AXS and other asset managers. Tesla, Nvidia, and PayPal were among the stocks the first wave of funds focused on. AXS CEO Greg Bassuk said the first batch of shares was chosen based on historical trading volume around major company events, such as earnings announcements. However, these products are likely not suitable for many retail investors. Lori Schock, director of the SEC’s office of investor education and advocacy, warned in a statement that the fund is not for everyone. “Like many other complex exchange-traded products, leveraged and/or inverse single-stock ETFs aim to deliver returns over extremely short periods of time (in some cases),” said Schock. case, even a day),” said Schock. “New risks may emerge for investors holding these products longer than that. of the underlying stock over the same time period.” Separately, SEC Commissioner Caroline Crenshaw warned that It can be very difficult for an investment professional to recommend these products to a retail investor. Bassuk says these funds are best suited for investors who are active in the market on a daily basis. “The big target audience of these funds are active traders and investors who are very focused on day-to-day stock movements. AXS funds use swaps to trade in stocks,” Bassuk said. achieve a multiple or inverse of a stock’s one-day performance.According to a summary prospectus, the funds are not designed to generate stated returns over a period longer than one day. , director of passive strategic research for North America at Morningstar, said potential investors should also be aware of a phenomenon known as “volatility decay” that can affect performance. the stock is volatile for a period of time, and you see it go up and down, but at the end of that period it ends up at the same price, if you own the stock, you will even sell . You don’t gain or lose anything. But if you own leveraged funds, you go down,” said Armor. AXS funds have a net expense ratio of 1.15%. That’s a bit more expensive than some leveraged and inverse funds. Popular funds focus on indexes, for example, the ProShares Short QQQ fund has a net expense ratio of 0.95% and the ProShares Short S&P 500 fund has a net expense ratio of 0.88%.
