Direxion Daily Energy Bull 2X Shares (ERX) Losses?

Did Your Broker, Advisor Recommend Direxion Daily Energy Bull 2X Shares (NYSEARCA: ERX)?

Soreide Law Group is investigating potential investor claims of sales practice violations against financial advisors and securities brokers who recommended or sold Direxion Daily Energy Bull 2X Shares (NYSEARCA: ERX). Evidently, ERX is a leveraged equity fund issued by Direxion Funds. It has a YTD Daily Total Return of -94.26%. Investors who purchased ERX could have faced serious losses. Here’s what we know about the fund.

What is ERX?

Evidently, ERX is a large-cap value fund that aims to achieve daily investment results (before expenses and fees) that are twice the daily performance of the Energy Select Sector Index. Apparently, about 80% of ERX is invested in securities and financial instruments of the Energy Select Sector Index, ETFs tracking the Index, and financial instruments which provide daily leveraged exposure to the Index or ETFs tracking the index. Apparently, S&P Dow Jones Indices provides the Energy Select Sector Index. This includes domestic companies focused on oil and gas as well as energy equipment and services.
Notably, ERX has a -94.26% YTD Daily Total Return and a -67.16% 3-year Daily Total Return. ERX has been hit particularly hard this year. The leveraged equity fund also sustained losses in 2014, 2015, 2017 and 2018. ERX’s net asset value (NAV) per share is $9.04 as of October 19, 2020.

Unique Risks Of Direxion Daily Energy Bull 2X Shares

Investments such as ERX are speculative and are not guaranteed to meet stated investment objectives. Notably, leveraged and inverse ETFs aim to achieve daily leveraged investment objectives which makes them riskier than non-leveraged alternative objectives. These investments may be unsuitable for many investors including those with conservative-to-moderate risk tolerances. These types of investments are not really intended for those who do not understand leverage or who do not intend to actively manage their investments.
In addition, ERX lacks diversification and is instead concentrated in the energy sector. Because of this lack of diversification, volatility in the energy sector alone can cause substantial losses for ERX investors. As we have seen this year, many energy companies have faced bankruptcies given sharp reductions in demand for oil and gas in light of the ongoing pandemic.

Brokers, Advisors Possibly Unsuitably Sold ERX To Conservative Investors

Critically, financial advisors are required to assess their clients’ suitability or appropriateness for certain recommended investments. These financial professionals are only supposed to recommend investments which are supported by their clients’ suitability profiles. Namely, securities brokers and financial advisors could have improperly recommended or sold ERX to investors. Also, financial advisors are required to disclose risks of investing. It is possible that some investors were misled by their advisors about risks of ERX at the time of purchasing shares.

Losses On ERX?

Have you experienced losses because of purchasing ERX from your securities broker or financial advisor? If so, contact Soreide Law Group at (888) 760-6552 and speak with experienced counsel about a possible recovery of your investment losses. Soreide Law Group represents clients on a contingency fee basis and advances all costs. The law firm has recovered millions of dollars for clients who have suffered losses due to misconduct of securities brokers and financial advisors.