New ETFs Coming from Vanguard, Direxion

Includes: LBJ, LHB, YANG, YINN
by: Tom Lydon

At the end of November, there were 908 exchange traded funds (ETFs) and exchange traded notes (ETNs). With new filings coming from Direxion and Vanguard, that number could be bigger at December’s end.

Direxion is in the process of creating four new ETFs. The S&P 500-linked ETFs that are in registration with the Securities and Exchange Commission (SEC), as reported by Cinthia Murphy of Index Universe, are:

  • Direxion Daily S&P 500 Bull 3x Shares
  • Direxion Daily Semiconductor Bull 3x Shares
  • Direxion Daily S&P 500 Bear 3x Shares
  • Direxion Daily Semiconductor Bear 3x Shares

In addition, Direxion launched four funds on Thursday that give long and short exposure to the China and Latin American markets:

  • Direxion Daily China Bull 3x Shares (CZM)
  • Direxion Daily China Bear 3x Shares (CZI)
  • Direxion Daily Latin America Bull 3x Shares (NYSEARCA:LBJ)
  • Direxion Daily Latin America Bear 3x Shares (NYSE:LHB)

The funds seek to provide 300% or -300% of the daily return of their benchmarks. Leveraged ETFs are not for all investors and are generally intended for daily use. Inverse or leveraged ETFs are used for creative portfolio management and are used for leverage to stave losses or to capitalize on market movements. Be sure to understand the risks before investing.

Vanguard’s latest fund in the pipe is intended to give investors inflation protection with active management, making it Vanguard’s first actively managed ETF. The ETF will invest most of its assets in Treasury Inflation-Protected Securities, or TIPS. While the fund uses the Barclays Capital U.S. Treasury Inflation Protected Securities Index as a benchmark, its average maturity and mix of bonds may differ from those in the index, reports Daisey Maxey for The Wall Street Journal.

TIPs are similar to regular Treasury bonds in that they have the same credit risk – effectively none – and they’re issued by the government. But the difference is how they pay the coupon. TIPs are also able to withstand stagflation- low growth mixed with high inflation.