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Exchange Traded Funds-Use Caution

Exchange Traded Funds-Use Caution 150 150 Rex Securities Law

Exchange-traded funds (ETFs) have become very popular over recent years and many investors are led to believe they are conservative and risk free.

This is not always the case.

An ETF is and investment that holds assets (stocks, bonds and/or commodities) which trades on stock exchanges, much like a stock. The fair market value is generally close to the net asset value of the investment it holds, at the end of each day. It is designed to combine the features of a mutual fund or unit investment trust.

Last year, the Florida Office of Financial Regulation (OFR) cautioned retail investors about ETFs. They stated in their release:

“While ETFs are often compared to mutual funds and marketed to investors seeking safe, stable investments, not all ETFs are the same. OFR’s advisory notes that some traditional ETFs may be appropriate for long-term holders, but others, including exotic leveraged and inverse ETFs, may require daily monitoring.”

ETF’s contain risks related to liquidity, fees and tax consequences that investors should understand before investing. Most importantly, if you are a retiree on fixed income, you need to understand whether the ETF your broker is suggesting is right for you and can you sell it quickly if you need cash?

UNG, USO and DBA are ETF’s that were designed to track the price of an underlying commodity, however have not succeded so well. Many brokers sold these investments without adequately disclosing risk issues. Direxion Funds, ProShares and Rydex also offered ETF’s that may not be suitable to retail investors, especially if you are retired.

If you have questions about the way your brokerage account is being handled or investment losses you have suffered, please do not hesitate to contact us .

Rex Securities Law , located in Boca Raton, FL, provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney. Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Rex Securities Law

561 391 1900

 

 

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