Leveraged and inverse exchange traded funds (ETFs) continue to be a focus in the industry. The latest volley comes from investment firm Edward Jones.
Edward Jones & Co. is no longer “selling” these funds, as some concerns have arisen over whether leveraged and inverse ETFs are appropriate for investors. Daisy Maxey for The Wall Street Journal reports that the logic behind the move is Edward Jones’ feeling that these ETFs are just not intended or appropriate for buy-and-hold investors.
One analyst with the firm pointed out that not all ETFs are created equal – that’s 100% true.
Are we off base in wondering whether this is just a bit of a PR ploy? After all, Edward Jones is known for gathering assets and employing a simple long-term buy-and-hold money management strategy. They’ve never been known for dabbling in alternative investment strategies.
We suspect it’s a bit of wanting to appear responsible to investors by eliminating the controversial products, though they have no use for them to begin with. What’s next – will they announce that they’re not buying pork belly futures?
It’s a clever way to ensure that Edward Jones becomes part of the leveraged and inverse ETF conversation. Hey…wait a minute. We just played right into their hands! Darn you, Edward Jones!
But in all seriousness, Edward Jones is right that these ETFs aren’t meant for long-term, buy-and-hold investing. Investors need to be educated about these funds and do their own due diligence before buying. They’re unique products that need to be fully understood.
Regulators have been watching leveraged ETFs closely. Record volatility hit these ETFs last year, making them veer further from their benchmarks than they ordinarily would have. On a day-to-day basis, however, they have always worked exactly as they should.
For more stories about leveraged ETFs, visit our long-short category.