There are two issues at play in these suits:

1. Did the providers give proper disclosure about these funds? Yes, they did. Leveraged and inverse ETF providers have taken care to ensure that investors don’t buy these funds without understanding how they operate. This, coupled with the SEC and FINRA warnings, should do much to mitigate any confusion or misunderstanding.

2. The investors filing these suits were “surprised” by how their funds performed. There has been no shortage of education on these funds. Anyone who has done their due diligence would have found a number of sources to use when evaluating them and enough information to determine whether they were worth the risks they entail.

ETF Database put together a good article explaining the issue of compounding. While compounding can work against investors in highly volatile markets, it can work an investor’s favor at other times. Read on to see how.