FINRA is pushing the financial industry to make sure the retail investor is educated on these complex funds. There is a lack of knowledge with these funds out there. “While such products may be useful in some sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis,” the notice said. “Due to effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective,”Reports Daisy Maxey from the Online WSJ.
ETF Industry sponsors are more than willing to educate the investor. They are aware of FINRA’s concerns and are diligently working to help. “Michael Sapir, chairman and chief executive of ProFunds Group, said ProFunds is supportive of any effort to educate brokers and investors about the benefits and risks of leveraged funds. But he added that such ETFs are “not more complicated than numerous funds in the marketplace used by retail investors and recommended by brokers.” ProFunds believes such funds are suitable for investors to use for longer than a day to pursue a variety of strategies to limit risk or pursue returns, Mr. Sapir said. ProFunds is working with Finra “to be sure that they have a complete picture and that they have full information,” he said,” Reports Maxey
Inverse and 2X, 3X leverage funds have become so popular that they account for billions of dollars in trading. But, most investors don’t understand how they actually work. So the word FINRA is trying to get out is applauded, as we need to educate investors on how these trading vechicles actually work.
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