{"id":1836,"date":"2021-07-12T10:48:37","date_gmt":"2021-07-12T10:48:37","guid":{"rendered":"https:\/\/investwithanedge.com\/?page_id=1836"},"modified":"2021-07-12T10:48:37","modified_gmt":"2021-07-12T10:48:37","slug":"insincere-concern-the-banning-of-leveraged-etfs","status":"publish","type":"page","link":"https:\/\/investwithanedge.com\/insincere-concern-the-banning-of-leveraged-etfs\/","title":{"rendered":"Insincere Concern – the Banning of Leveraged ETFs"},"content":{"rendered":"
Some brokerage firms are banning the sale of leveraged and inverse ETFs. They claim to be taking these steps out of concern for their clients, but the facts paint a different picture. This story has been 16 years in the making. Why all the fuss now?<\/p>\n
In June, FINRA issued a warning to brokers and investment advisors regarding leveraged and inverse ETFs. We predicted at the time that brokerage firms would likely place some restrictions, but we never envisioned a total ban. We reported the release from FINRA contained something that ought to put a chill up the spine of leveraged ETF marketing executives: \u201c\u2026inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets.\u201d This is legal-speak for \u201cDon\u2019t sell these to anybody except day traders.\u201d<\/p>\n
By July it was apparent that the FINRA warning had a greater impact on the legal departments of the brokerage houses that sold these products than on the leveraged ETF marketing executives. After all, the ETF sponsors have long warned of the dangers that can come from misusing these products and all provide warnings and educational material. Here are links to such information for DirexionShares, ProShares, and RydexShares.<\/p>\n
Edward Jones was the first to ban\/cut leveraged ETFs from their lineup according to a July 21 article in the Wall Street Journal. Next came reports that LPL Financial, Ameriprise Financial, and UBS were also banning the products.<\/p>\n
I\u2019m not sure what their real motives are, but the actions taken by these brokers seem insincere. Here are some of the reasons why I feel this way:<\/p>\n
The fact is that the \u201cdaily reset\u201d of leverage actually protects investors from blowing themselves up. It prevents a position from going to zero, it prevents margin calls, and it prevents the unlimited loss potential of short-selling.<\/p>\n
These products should not be banned. They should be hailed as great achievements in risk management. They are actually protecting investors from themselves.<\/p>\n
Disclosure: I currently own a few leveraged and inverse products. I have been using them since 1994, and they have always performed as stated in the prospectus.<\/p>\n","protected":false},"excerpt":{"rendered":"
Some brokerage firms are banning the sale of leveraged and inverse ETFs. They claim to be taking these steps out of concern for their clients, but the facts paint a different picture. This story has been 16 years in the making. Why all the fuss now? In June, FINRA issued a warning to brokers and …<\/p>\n","protected":false},"author":4,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"acf":[],"_links":{"self":[{"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/pages\/1836"}],"collection":[{"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/comments?post=1836"}],"version-history":[{"count":0,"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/pages\/1836\/revisions"}],"wp:attachment":[{"href":"https:\/\/investwithanedge.com\/wp-json\/wp\/v2\/media?parent=1836"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}