Jerry Slusiewicz, president of Pacific Financial Planners, is currently using the funds to achieve quick, lower-cost market exposure, but believes that as the market environment changes, the Direxion ETFs will become more important as hedging tools, in particular for protecting a portfolio without creating tax consequences. In this way, the funds will fill what Slusiewicz terms an "unbelievably great void."

For example, Welch suggested that investors faced with capital gains taxes concerned about protecting their investment against an end-of-year decline could simply purchase one of the Direxion ETFs rather than selling stock and realizing the capital gains.

...Or A Dangerous Gamble?

The main thing to remember about these funds that everyone—including the folks at Direxion—agrees on is that these are not the long-term, buy-and-hold core investment vehicles that should represent the bulk of a portfolio. Direxion executives make it clear that they did not design these products for the average investor; rather, they are tools for the hands-on, sophisticated trader. As such, the beginning investor or investors who don't want to take an active approach to managing their personal portfolios should probably steer clear.

"We are very up front, transparent and straightforward about making sure people understand what these products are all about, what's in them and making sure people know how they operate. If people don't have a full understanding of what these things are, we really do recommend they don't get into them. We want people to use them if they work for their strategies, but we really don't want the more-ignorant investor—not to be too blunt—to take a stab at these when they don't have a full understanding," O'Rourke said.

Essentially, these are funds you never want to turn your back on—triple leverage means that in three days, an unattended fund that sees declines of 2% each day in its benchmark index would be down more than 20%. The compounding issue means there is no guarantee that if the market falls 20% this year, a 300% inverse fund will deliver 60% returns. It only guarantees returns on a one-day basis; after one day, the math gets funny.

The compounding effect is an issue with any product offering more than straight 100% or -100% exposure, but it becomes a particularly urgent issue when triple exposure is paired with exceptionally volatile markets.

"If you get caught on the wrong side of one of these, it's a nightmare," Welch said.

At Ironwood, both Stringer and Sinani emphasized that a triple-exposure fund should not represent a large part of an overall portfolio, and they have kept their investments in such funds to 5-10%.

Stringer notes that although the Direxion ETFs have been, as he puts it, "spectacularly effective" for his firm, "it's not for the faint of heart or for those unwilling to do their research or their due diligence."

And of course, because the Direxion ETFs primarily gain their exposure through swaps, counterparty risk is an issue to monitor as well.



Table includes first ETFs launched by Direxion in November 2008.

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