AXS Investments launched eight of its 18 approved single-equity ETFs this month. Funds aim to increase exposure to short-term individual equity investments.
It’s designed for active traders, and traders looking to make tactical trading decisions on a daily basis,” the company’s CEO, Greg Pasock, told CNBC’s “ETF Edge” on Monday. “As this market has matured for leveraged ETFs… we are excited to introduce single stock ETFs to the US market.”
Basuk notes that AXS’ new products are based on actively traded stocks, including sector leaders such as Tesla, NVIDIA, PayPal, Nike, Pfizer and others in the first tranche. He added that funds of a similar nature are already available in European markets.
“that it [ETF innovation is] Always a balance between coming up with better tools for investors, and doing so within the framework of regulatory constraints,” Pasok explained.
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Dave Nadig, financial futurist at VettaFi, addressed concerns about business volume and regulatory concerns among skeptics of individual stocks in the ETF. It’s a surprising issue with the Securities and Exchange Commission, too.
“My fear is that people don’t read the labels well enough,” he said, explaining how volatility from these funds can “kill” investor returns if held incorrectly. “They don’t necessarily understand that you can’t keep these things for a week or two.”
Investors may also lose out on the benefits of diversification because single stock ETFs don’t track entire indexes, according to the Securities and Exchange Commission.
“Because leveraged single stock ETFs specifically increase the impact of the price movements of the underlying single stock, investors who own these funds will experience greater volatility and risk than investors who own the same underlying stocks.” The Securities and Exchange Commission said in a statement this month.
However, Basuk stresses that the new ETFs give investors another option that may help them profit from the daily moves. In addition, ETFs are believed to offer less risk associated with buying on margin.
“Margin-buying investors are likely to lose more than their initial investment, while this one-share ETF, in this respect, we think is a better mousetrap in that investors can’t lose more than they invest,” Basuk said.
Bearish bets among the eight live single stock ETFs have been low since their listing date on July 14th. The biggest lag was the AXS 1.5X PYPL Bear Daily ETF, which is down almost 22%.
Bullish bets show stronger returns. The AXS 1.5X PYPL Bull Daily ETF is up just under 27%.