Direxion Daily Semiconductor Bull 3X ETF
The investment seeks daily investment results, before fees and expenses, of 300% of the daily performance of the PHLX Semiconductor Sector Index. The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments, such as swap agreements, and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index measures the performance of domestic companies engaged in the design, distribution, manufacture and sale of semiconductors. The fund is non-diversified. These leveraged ETFs seek a return that is 300% or -300% of the return of their benchmark index for a single day. The funds should not be expected to provide three times or negative three times the return of the benchmark’s cumulative return for periods greater than a day.
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What is SOXL stock?
Can microchips lead to mega gains?
Also known as Direxion Daily Semiconductor Bull 3X Shares, SOXL is a leveraged Exchange Traded Fund (ETF) product.
Designed by Direxion, SOXL returns three times (3x) the value of the ICE Semiconductor Sector Index (ICESEMIT) before fees and expenses on any given trading day.
What is ICESEMIT?
ICESEMIT is a market-cap-weighted index that tracks the performance of America’s 30 largest listed semiconductor companies.
Companies on the ICESEMIT index manufacture materials that conduct electricity and are used in electronic applications (semiconductors). ICESEMIT companies also utilise LED/OLED technology and provide services associated with semiconductors such as testing and packaging.
How does a leveraged ETF work?
Leveraged ETFs return a multiple of earnings or losses in an underlying index for any given trading day.
In the case of SOXL, if ICESEMIT increases 2% in one day, SOXL will return 6%. If ICESEMIT decreases by 2%, SOXL will decrease 6%.
SOXL and other leveraged ETFs can be bought or sold on an exchange just like any stock.
How is SOXL ETF different from SOXX ETF?
While the performance of both ETFs are impacted by the behaviour of the ICE Semiconductor Sector Index, the main difference is leverage.
Issued by Direxion, SOXL is a 3x leveraged ETF. SOXX (iShares Semiconductor ETF) issued by BlackRock, is not leveraged at all.
As of March 2022, SOXL’s expense ratio sits at 0.90% while SOXX’s sits at 0.43%.
What stocks are in SOXL?
SOXL tracks the ICESEMIT index.
As of March 2022, some of ICESEMIT’s largest holdings include Broadcom Limited (9.34), Qualcomm (7.87), Nvidia (6.99), Intel (5.83), Advanced Micro Devices (5.06), Marvell Technology (4.77) and Micron Technology (4.31).
79.48% of the ICESEMIT index is made up of semiconductor companies. The remaining 20.52% are semiconductor equipment companies.
Is SOXL a good long-term buy?
No, SOXL is not designed as a long-term buy and hold investment.
SOXL is a short-term trading vehicle meant to be bought and sold intraday. It is often used by financial advisers and professionals, in particular those who understand leverage and its potential gain and loss impacts.
As per Direxion's fact sheet:
“These leveraged ETFs seek a return that is 300% or -300% of the return of their benchmark index for a single day. The funds should not be expected to provide three times or negative three times the return of the benchmark’s cumulative return for periods greater than a day.
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This does not constitute financial advice. You should do your own research before making an investment decision. Past performance is not a reliable indication of future performance. No representation is made as to the timeliness, reliability, accuracy or completeness of the market data provided.