One aspect investors may not be taking into consideration is the relatively higher cost of doing business with leveraged ETFs. For example, the Direxion Daily Small Cap Bull 3X Shares (TNA) charges an expense ratio of 1.03 percent per year, which puts it among the more expensive ETFs. It is in line with the cost of its rival ProShares fund. The fee is lower than most specialty bear-market mutual funds, however.
Rawson says the complexity of leveraged products makes them unattractive to most investors.
He says an outlook for a particular segment that calls for "leverage" can be achieved by taking a larger position in an unleveraged and liquid fund such as iShares Russell 2000 Index (IWM) or iShares S&P SmallCap 600 Index (IJR).