KNOW is one of the first ETFs of its kind, with a relatively unique strategy. Its index selects 100 stocks from the S&P 1500 based on insider sentiment. Insider sentiment involves analyzing public company filings related to frequency of trades, purchases of stock and increases in holdings by “insiders,” as well as positive earnings analysis. The idea here is that insiders know best how a business is operating and the implications on future stock price, so if an insider is buying up shares, that may be a good sign that things are going well. Likewise, a selling trend behind the scenes may point to a relatively weak future for a particular company.
This fund debuted at the end of 2011 and is one of the few funds from Direxion that do not apply a leverage or inverse exposure. KNOW’s fees of 65 basis points place it on the expensive side, but given its relatively unique strategy, it comes as no surprise to see it charge a premium for its services. While this fund would never be used as a building block, it certainly has a place as a tactical investment, as its one of a kind strategy has the potential to provide handsome returns to your portfolio.