The Joys And Pains Of 3X Returns (FAS, FAZ, TYH) （ZZ)

The Joys And Pains Of 3X Returns (FAS, FAZ, TYH)

February 17, 2009 | By Gregory S. Davis

The last thing on the minds of most investors these days is the desire to

use leverage to improve investment returns. And that's good news. So, to

maximize returns and increase exposure to various slices of the market,

investors can consider using exchange-traded funds (ETFs) designed to return

three times the yields of the underlying investments.

Triple The Upside/Downside On Financia

The Direxion Financial Bull 3X Shares ETF (NYSE:FAS) is designed to return

three times the performance of the Russell 1000 Financial Services Index (

Financial Index). The underlying financial services index is a capital

weighted index of financial service providers ranging from large

capitalization banks, like Wells Fargo (NYSE:WFC) and Goldman Sachs (NYSE:GS

), to insurance providers, like Aflac (NYSE:AFL) and Allstate (NYSE:ALL).

True to form, the FAS ETF carried out its mission and posted a negative

return in slight excess of 64% for year-to-date ended February 11, while the

Russell 1000 Financial Services Index declined approximately 22% over the

The FAS ETF will invest a minimum of 80% of its net assets in long positions

of the individual securities that make up the Financial Index. The fund

also invests in financial instruments that provide leveraged and unleveraged

exposure to the Financial Index, thus, creating the ability for returns of

the underlying index to be tripled. The balance of the net assets are held

in money market instruments.

I knew you'd ask! The other side of the coin offers investors the

opportunity to benefit from the downward slide of financials in the Direxion

Financial Bear 3X Shares ETF (NYSE:FAZ). The FAZ fund is designed to return

the inverse of the Financial Index by creating short positions as opposed

to holding long positions in equities, like its Bull friendly sister, the

ETFs that offer three times the up (Bull) and three times the down (Bear)

also are available as sector-specific funds. These include: the Direxion

Technology Bull 3X Shares (NYSE:TYH), the Direxion Technology Bear 3X Shares

Given the volatility in the market, only investors who have the time to pay

attention to these investment vehicles, or investors who have a minimum time

horizon of three to five years, should consider allocating a portion of

their investments into the three- times returns ETFs. The upside potential

looks explosive if you're on the right side of the market movement. However,