The providers of leveraged and inverse ETFs say their products are designed to magnify the market’s returns on a daily basis, and are not designed for long-term investors.
“These products seek a daily goal,” said Andrew O’Rourke, chief marketing officer of Direxion Funds, in the InvestmentNews story. “They are absolutely not buy-and-hold investments and should not be viewed through the same lens as a typical buy-and-hold mutual fund.”
Last week, the Financial Industry Regulatory Authority sanctioned four banks and fined them a collective $9.1 million over improper sales of leveraged and inverse ETFs.
The four firms are Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS) and UBS (NYSE: UBS). [Banks Fined Over ETF Sales]
FINRA said the financial companies were fined for selling leveraged and inverse ETFs “without reasonable supervision and for not having a reasonable basis for recommending the securities.” [Inverse, Leveraged ETFs Raise Risks for Online Brokers]