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Active traders are sharing key trends and insights that guide their ETF investment strategy: Direxion 

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ETF issuer Direxion has announced the results of their second annual Direxion Trader Sentiment Survey, conducted by the Harris Poll, designed to recognise the unique needs and motivations of active traders in the current market environment. 

The survey data indicates that active traders are seeking enhanced returns, control, and opportunities in technology and artificial intelligence (AI) as they continue to evolve their strategies and adapt to market conditions. 

Highlights include: 

50 per cent of active traders reported holding ETFs in their portfolios in 2023, showing consistency with the previous year’s figure of 49 per cent. 

One in five active traders (23 per cent) hold 10 or more ETFs, with 42 per cent increasing their ETF allocation over the past year. These traders have adopted more aggressive ETF trading strategies, in hopes of maximising returns. 

A subset of active traders has embraced leveraged ETFs, further diversifying their portfolios. These leveraged instruments attract 15 per cent of active traders, offering the potential to take advantage of the bull market and use leveraged ETFs to magnify their exposure to seek to outperform it.

The generational distinction in active trading 

Younger generations who are active traders, including Gen Z/Millennials, see substantial value in ETFs, particularly those tracking non-traditional asset classes, with 52 per cent finding them very valuable for their investment goals, compared to 36 per cent of Gen X. However, results showed that similar proportions of Gen Z/Millennials and Gen X hold ETFs in their portfolio (52 per cent vs. 54 per cent) despite differences in value seen in the products. 

“Across generations, traders are showcasing active interest and control in their investment decisions,” says Direxion Chief Marketing Officer Andy O’Rourke. “They not only understand leveraged & inverse ETFs, but also see the value of diversification through non-traditional trading vehicles. At Direxion, we’re committed to supporting traders of all generations on their journey to informed decision-making, ensuring they have the educational tools and materials they need to succeed.” 

Traits of active traders in a steady market

Active traders who are knowledgeable about ETFs exhibit a strong commitment to them by holding five or more of the instruments in their portfolios. They believe ETFs provide the flexibility to allow them to directly control their investment decisions in the short term, highlighting the importance of knowledge and engagement in active trading. 

Additionally, at the time of the survey active traders continued their quest for short-term trading opportunities in the low volatility, steady bull market environment. Their priorities emphasise the pursuit of potential income and excess returns, selected by 48 per cent of active traders as the most common factor when considering investment options. 

One distinguishing factor of active traders is their desire for control and the belief that they can affect positive outcomes through their active trading. A majority (59 per cent) perceive benefits in being active traders due to their ability to make timely decisions, and 54 per cent capitalize on their personal knowledge to take advantage of short-term market movements.

The active trader outlook on technology and AI 

Active traders are at the forefront of adopting innovative technologies. They express a keen interest in Technology (61 per cent) and AI and Robotics (45 per cent) as ETF sectors or industries that will provide the most value in the next 12 months. These traders not only invest in AI but also aim to harness it to inform their trading decisions with 60 per cent of active traders currently using or have used AI/robo-advisers in their investment planning, strategy, or execution, and 71 per cent plan to start to increase their use of AI/robo-adviser tools in the next two years. This signals a strong willingness to incorporate this technology into their investing strategies, the firm says.

Their preference for the technology sector remains consistent, with 57 per cent in 2023 compared to 56 per cent in 2022.     “Over the past year, active traders have increasingly turned their attention to the AI and Technology markets, understanding the transformative potential that these industries offer,” says Ed Egilinsky, Managing Director at Direxion.” For the first three quarters of 2023, the dollar value trading in our four flagship technology related leveraged & inverse ETFs (TECL, TECS, SOXL, SOXS) represented over a third (36 per cent) of the overall value traded in the entire suite of funds.”

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