September 24, 2009

Investor Alert: Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors

FINRA and the Securities and Exchange Commission (SEC) recently issued an Investor Alert warning retail investors of the risks associated with investing in these highly complex financial products. The joint alert was prompted by the concern that individual investors may be confused about the performance objectives of leveraged and inverse exchange-traded funds (ETFs).

Traditional ETFs are designed to track an index, such as the S&P 500, or the price of an individual asset. Leveraged ETFs seek to deliver multiples of the performance of the index or benchmark they track while Inverse ETFs seek to deliver the opposite of that performance. These ETFs typically are designed to achieve their stated performance objectives on a daily basis. Some investors might expect that they may meet their stated daily performance objectives over the long term as well. Investors should be aware that performance of these ETFs over a period longer than one day can differ significantly from their stated daily performance objectives.

Read the alert for more details.

Investor Tools: FINRA Launches Improved and Audited Calculators

This past August, FINRA introduced new versions of the Loan, Savings, College Savings and Required Minimum Distribution calculators. These popular investor tools were revamped to incorporate redesigned user interfaces and improved calculation methodologies. The new versions of the tools were fully audited before launch to ensure that the new methodologies produce the most accurate results possible.

You may use the Loan Calculator to determine the monthly payment for a fixed-rate loan. Try the Savings Calculator to see how a consistent approach to investing can make your money grow. The College Savings Calculator helps to determine the amount you must invest each year to have enough money to cover all college costs. Finally, use the Required Minimum Distribution Calculator to determine your RMD from a 401(k) or IRA.

Podcasts

Avoiding Investment Scams
Investment fraud comes in five classic types. Learn how to spot a scam's red flags and hear about tools you can use to steer clear. Listen now.

Organize Your Financial Records

Investing can involve a lot of paperwork. Listen for tips to help you organize these financial documents and keep track of your money. Listen now.

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If you don't find an answer, use the "Ask an Expert" link within any FAQ and the system automatically routes new questions to the right subject matter expert, who will provide responses via email.

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