The controversy over leveraged exchange traded funds (ETFs) seems to continue to grow. The latest name to jump into the fray is Fidelity, which has warned customers that the products are complex.
Fidelity is just the latest in a long line. Some of the largest investment advisory firms, like Ameriprise Financial (AMP), Raymond James (RJF) and UBS (UBS) have curtailed client activity in them or are completely getting their clients out of them.
Michael Comeau of Minyanville states that this is bogus because all it is doing is relieving investors and their advisors of personal responsibility. Comeau states that leveraged ETFs have become a scapegoat for investors’ losses and frustration with the market.
We agree with Comeau. Leveraged ETFs are excellent tools if properly implemented into a portfolio. But in order to properly use them, investors need to become more educated and know exactly how they work. The providers of these ETFs have been fully transparent with investors and have provided pages upon pages of literature to illustrate how these ETFs work and the risks involved with them. In our view, no one is trying to hide anything here.
We’re curious about what our readers think, though. Have you taken our poll about leveraged an inverse ETFs yet? If not, please do so – it’s just one easy question! We’ll publish the results soon.
For more stories on leveraged ETFs, visit our leveraged ETF category.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.