Is NAIL a Good ETF to Buy?

If you’re thinking about buying the NAIL ETF, this article will analyze its performance, cost, holdings, and the risks you should expect. But before getting too far, you might be wondering what exactly is NAIL?

NAIL is the ticker symbol for the Direxion Daily Homebuilders & Supplies Bull 3X Shares ETF. Owned by Direxion Shares and created in 2015, this ETF has over $263 million in assets under management (AUM).

The ETF is designed to provide investors with daily investment returns three times the performance of the Dow Jones U.S. Select Home Index, which tracks the performance of U.S. companies in the home construction sector. So, if the index gains 1% in a day, NAIL should rise approximately 3%. On the other hand, if the index drops 1%, NAIL should theoretically, at least, fall by around 3%.

NAIL ETF invests at least 80% of its assets in financial instruments (securities) that comprise the Dow Jones U.S. Select Home Index. This creates a long position for the investor and provides a 300% leveraged exposure to the index.

NAIL Holdings

NAIL has 51 holdings in the home construction sector, with all of them being located in the U.S. Some of its top allocations include:

• D R Horton
• Lennar Corporation
• NVR
• Pultegroup
• Lowe’s Cos Inc
• Home Depot
• Sherwin Williams
• Toll Brothers

NAIL’s index sector weightings include homebuilding, building products, home improvement retail, specialty chemicals, home furnishings, construction materials, and home furnishing retail.

Worth noting that while this looks like it’s diversified, its top holdings are in the homebuilding sector (over 60%) so, if that sector were to experience a market downturn, the returns of the ETF would also decline.

Don’t overlook the fact that this ETF lacks geographical diversification because all its holdings are in the U.S.

Cost Metrics

This ETF’s expense ratio is 0.97%, a figure that is well above some of the lowest expense ratios for ETFs, which can go as low as 0.10%.

Still we have to acknowledge the fact that some ETFs can charge closer to 2%, so given that, NAIL’S ETF is sub-1% it’s not exorbitant by any means. For instance, if you invest $200,000 in the fund, you would pay $1,940 at the end of the year.

NAIL Track Record

Its performance aligns with the housing market’s performance since it tracks companies within this sector. Since its inception in 2015, NAIL ETF’s returns have grown by 129%. While this is impressive, it is still below the performance of broader market indices like the S&P 500, which grew by 185%.

NAIL has, over the last 10 years, had its fair share of ups and downs, with its performance showing high volatility along the way. During periods of rising demand for housing, NAIL shows impressive returns, while the reverse is true.

Its last dividend yield as of December 2024 was 0.63%.

Why NAIL May Be a Good Buy

NAIL ETF may only be the best option under certain conditions and for a particular set of investors. 

If the market performs exceptionally well, like periods of housing booms, you can reap very high returns due to NAIL’s leverage, which triples the returns of the Dow Jones U.S. Select Home Index.

For instance, say you invest $10,000 in the ETF, and the underlying index increases by 20% in a year, your investment could grow by up to 60%, which is about $16,000. Of course, this figure is before costs, such as the expense ratio.

Another reason why this might be a good buy is the trade opportunity it offers you over a shorter time horizon, especially if you’re a swing trader. You can capitalize on short-term price movements, like during high momentum periods for tactical trades.

Lastly, the companies that make up this ETF make this a great investment, especially the top holdings. They’ve consistently shown stability in revenue and stock prices. For instance, D R Horton is among the largest homebuilder companies by volume in the U.S., with a market capitalization of $44.7 billion.

The Risks of Buying NAIL ETF

The most apparent risk for investing in this ETF is the housing sector’s volatility. And it’s not just the sector’s volatility you have to deal with — leveraged ETFs are also highly volatile. The ups and downs in this sector can negatively affect your overall returns, especially if the market moves against your position.

In addition because the NAIL ETF triples the performance of its underlying index, if the index loses, your investment will lose three times as much as the index. That’s why this investment is meant for high-risk investors.

Who is Best Suited to Invest in NAIL?

NAIL ETF isn’t for every investor. It may be the best option if you have a bullish outlook on the housing sector and have a high-risk tolerance.

If you prefer to buy and hold your investments, this may not be suitable for you. The daily rebalancing process involved in this ETF may cause diminishing returns.

Is There an Alternative for NAIL ETF?

If you want exposure to the housing sector, an alternative to consider are non-leveraged, traditional ETFs like the iShares U.S. Home Construction ETF (ITB) or SPDR S&P Homebuilders ETF (XHB).

Is NAIL a Good ETF to Buy?

The NAIL ETF may not be a good buy for lower-risk, long-term investors who are better off investing in traditional ETFs or other investment vehicles like REITs that still offer exposure to the housing sector without the leverage.

On the other hand, if you have an appetite for risk and want to capitalize on short-term trade opportunities, NAIL has the volatility and potential swings to offer a lot of opportunity in a hurry.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.