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Is Direxion Mo Sm Cap Bull 2X Fd (DXRLX) a Strong Mutual Fund Pick Right Now?

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On the lookout for a Small Cap Blend fund? Starting with Direxion Monthly Small Cap Bull 2X Fund (DXRLX - Free Report) is one possibility. DXRLX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

DXRLX is one of many Small Cap Blend funds to choose from. Small Cap Blend mutual funds allow investors a way to diversify their funds among various types of small-cap stocks. These funds seek companies with market capitalization of less than $2 billion, and aid in reducing volatility inherent in lower market cap stocks.

History of Fund/Manager

DXRLX finds itself in the Direxion Funds family, based out of New York. Direxion Monthly Small Cap Bull 2X Fund debuted in February of 1999. Since then, DXRLX has accumulated assets of about $20.36 million, according to the most recently available information. The fund's current manager, Paul Brigandi, has been in charge of the fund since December of 2004.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. DXRLX has a 5-year annualized total return of 26.3% and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 16.5% The fund's 3-year annualized total return of 16.5% places it in the top third, a metric that will likely stand out if you prefer to look at shorter time frames.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. DXRLX's standard deviation over the past three years is 28.14% compared to the category average of 13.91%. The fund's standard deviation over the past 5 years is 27.81% compared to the category average of 13.31%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In DXRLX's case, the fund lost 91.57% in the most recent bear market and underperformed its peer group by 39.13%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. DXRLX has a 5-year beta of 2.32, which means it is likely to be more volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a negative alpha of -6.1, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, DXRLX is a no load fund. It has an expense ratio of 1.35% compared to the category average of 1.15%. From a cost perspective, DXRLX is actually more expensive than its peers.

This fund requires a minimum initial investment of $25,000, and each subsequent investment should be at least $500.

Bottom Line

Overall, Direxion Monthly Small Cap Bull 2X Fund DXRLX has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, this fund looks like a good potential choice for investors right now.

Don't stop here for your research on Small Cap Blend funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare DXRLX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.




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