As Exchange Traded Funds become increasingly popular investment vehicles, more are warning about the dangers of leveraged ETFs.
As the Wall Street Journal reports, Fidelity is the latest voice to caution investors about the complex, short-term products:
“Leveraged products are complex, carry substantial risks and are intended for short-term trading,” a warning to customers on Fidelity’s Web site said. “Most reset daily and seek to achieve their objectives on a daily basis. Due to compounding, performance over longer periods can differ significantly from the performance of the underlying index.”
Fidelity isn’t alone. As the Journal notes, Morgan Stanley is reviewing its sales practices for the products; UBS suspended purchases; LPL prohibited sales of the leveraged ETFs that seek more than two times the long or short performance of their target index; and Ameriprise stopped soliciting the purchase of the products.
The SEC is taking note. Just today, chairman Mary Schapiro put leveraged ETF purveyors on notice during a CNBC appearance, suggesting they should come with better warnings for would-be investors.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.