Tactically Trading HY

In addition to providing value to traditional buy and hold asset allocation strategies, high yield bonds can also be an ideal investments for tactically minded investors. Because The Direxion Dynamic HY Bond Fund (PDHYX) and The Direxion HY Bear Fund (PHBRX) are extremely liquid, they can be useful to those who are interested in tactically trading this asset class.

Unlike equities, high yield bonds have exhibited lower volatility and have produced favorable results in simple tactical strategies, such as those that incorporate moving averages. Equities do not tend to capture any notable trends in a moving average strategy because of their inherent volatility.

Although many investors and investment professionals are not familiar with the potential benefits of actively trading high yield, many investors have been employing such strategies for years. Active high yield strategies can vary in complexity and composition. For illustrative purposes, Direxion has implemented a simple 50 day moving average on the Lipper Current High Yield Bond Fund Index to illustrate the benefits of actively trading high yield. When the index's closing value is higher than the average index value for the 50 previous trading days, the strategy calls for a buy. When the index value is lower than the 50-day average, the strategy calls for a sell. From the chart below, it is evident that low volatility makes the High Yield sector attractive for active trading, as seen in the Lipper Active Strategy.

Applying the same strategy to the S&P 500 did not produce the same favorable results. Why? The inherent volatility associated with equites commonly causes many strategies to buy and sell to quickly, not allowing for the caupture of directional trends. Please remember that it is not possible to invest directly in an index.

Direxion works with investment professionals to ensure they have proper tools and information to successfully pursue these strategies. If you would like to learn more about tactically trading high yield, call Direxion today.

The risks associated with the Dynamic HY Bond Fund and HY Bear Fund are detailed in the prospectus. These include risks of the investment adviser's investment strategy, credit risk and lower-quality debt instruments, market timing activity and high portfolio turnover, risks of aggressive investment techniques, risks of investing in derivatives, swap agreement risks, adverse market conditions, interest rate changes, prepayment risk, risk of non-diversification, and risk of shorting instruments.

An investor should consider the investment objectives, risks, charges, and expenses of the Direxion funds carefully before investing. The prospectus contains this and other information about Direxion funds. To obtain a prospectus, please contact Direxion Funds at 800.851.0511. The prospectus should be read carefully before investing. Investing in index funds may be more volatile than investing in broadly diversified funds.

Date of First Use: May 19, 2009. Distributed by: Rafferty Capital Markets, LLC.