The North American Securities Administrators Association (NASAA) recently issued a warning about the potential dangers of using exchange traded funds. The warning is empty, vague and at best states information that any investor can find within their product prospectus, a mutual fund columnist argues.
NASAA cautions investors “may not understand how these complex investment products work or the potential risks they may face.” David Massey, the North Carolina deputy securities administrator and current NASAA president, noted: “As with any investment, investors should know what they are investing in.”
Chuck Jaffe on MarketWatch argues that if securities regulators are going to warn the public against “complex investment products” and tell them to do their homework, they should also include mutual funds, bonds and the rest of the investment product spectrum. [Are Complex ETFs For You?]
“It was less like an investor advisory and more like they were doing Mad Libs, and every time they needed to insert a form of investment they said ‘ETFs,’” said Paul Justice, director of ETF research at Morningstar, in the column. “This is an advisory that seems to do nothing except maybe steer some people away from what, for them, might be an intelligent investment choice.”