I have been investing since 1994; and got first into stock trading. However; after 2007, and especially when there were more funds available after 2011; it opened up the possibility to take advantage of fast/big drops, or trade of commodities; through a derivative fund. Even if they go against you; the prospectus and history charts allow investors to make decisions on whether historic contango/leverage could be damaging to them. They have the ability to liquidate their positions at any time. The funds give investors far less risk than having to invest in the Futures markets - where one can get a margin call and quickly be wiped out and even owe money, the Options markets - where one has to be right about both price and time and if they are wrong - the contracts eventually expire worthless for a 100% loss, or the Forex markets - that have up to 50:1 leverage and move rapidly and are unpredictable. Right now, if conditions are right for a market to go down - an investor/trader can find a fund that will short to underlying. Many investor/traders like me - do not want to "short" because you owe the dividend to the broker and you must pay interest if held after the settlement date. So, going "long" in an instrument that can be held long-term; is the only viable option many people are willing to take. Individual stocks are also risky. I found that out with Centennial Technologies in 1996. The CEO and CFO were inflating the books and went to jail for 2 years; and the stock never recovered. It made a sham out of the NYSE; because Centennial Technologies was able to get listed; moving from the NASDAQ to the NYSE in 1996. Even the State of Massachusetts retirement fund "got taken" by 1997. I only got back about $6,000 of my $55,000 and some litigation money over 20 years - maybe $5,000. That was an NYSE stock that got delisted - going from $37 per share down to $6 per share from the end of 1996 into early 1997 - then on to the pink sheets. Then there was Premier Laser. The CEO was a PhD; and the company had FDA approval for a dental laser. But the CEO had no business sense, agreements fell through, and the stock eventually went from about $30 per share down to a few dollars - also in the late 1990s. It got delisted and put on the pink sheets. Once again; both of these were stocks in viable/initially stable companies that got wiped out. Then there was SSE Telecommunications; that had government contracts to provide digital modem support for satellite communication. They were about $5 a share and they eventually folded. All three of these were carried as base recommendations at the time - by the Cabot Market Letter, Cutting Edge Technologies Letter, and the Undiscovered Stocks Newsletter, respectively; all in the 1990s. I lost just under $100,000 on viable NYSE/NASDAQ stocks - that the regulators have never had any restrictions on trading. So, trading is risky - regardless - and with my demonstrations outlined above - equally risky. Whether it is these stocks, or outright shorting stocks - where your risk is unlimited, or options - which can expire worthless, or futures - where you can owe more than you invested, or the leverage/unpredictability of currency pairs in FOREX - these inverse and/or leveraged funds provide no greater risk - than the stocks I was totally allowed to buy and lost almost all of my money in; during the "hay days" of the 1990s - before the tech bubble even blew in 2000. Yes; the losses by people {not me}, in XIV and SVXY on the night of February 5th, 2018 were significant - but not any worse; than in stocks of the 1990s that anyone could buy - because my $100,000 turn into about $10,000 - just as bad; as a worse case for XIV and SVXY in 2018. But consider; anyone in/before 1996 could buy CENT that became CNT; and also, have been wiped out in 1997 - and there were - and still are no restrictions on those kinds of purchases. In 2022; there were no restrictions in buying the tech movers like; Zoom, Meta, or Netflix - punished severely by May. There is no guarantee that purchases of any unrestricted stocks are really safe - short, and even long-term.
Bruce Lohman Comment On Regulatory Notice 22-08
I have been investing since 1994; and got first into stock trading. However; after 2007, and especially when there were more funds available after 2011; it opened up the possibility to take advantage of fast/big drops, or trade of commodities; through a derivative fund. Even if they go against you; the prospectus and history charts allow investors to make decisions on whether historic contango/leverage could be damaging to them. They have the ability to liquidate their positions at any time. The funds give investors far less risk than having to invest in the Futures markets - where one can get a margin call and quickly be wiped out and even owe money, the Options markets - where one has to be right about both price and time and if they are wrong - the contracts eventually expire worthless for a 100% loss, or the Forex markets - that have up to 50:1 leverage and move rapidly and are unpredictable. Right now, if conditions are right for a market to go down - an investor/trader can find a fund that will short to underlying. Many investor/traders like me - do not want to "short" because you owe the dividend to the broker and you must pay interest if held after the settlement date. So, going "long" in an instrument that can be held long-term; is the only viable option many people are willing to take. Individual stocks are also risky. I found that out with Centennial Technologies in 1996. The CEO and CFO were inflating the books and went to jail for 2 years; and the stock never recovered. It made a sham out of the NYSE; because Centennial Technologies was able to get listed; moving from the NASDAQ to the NYSE in 1996. Even the State of Massachusetts retirement fund "got taken" by 1997. I only got back about $6,000 of my $55,000 and some litigation money over 20 years - maybe $5,000. That was an NYSE stock that got delisted - going from $37 per share down to $6 per share from the end of 1996 into early 1997 - then on to the pink sheets. Then there was Premier Laser. The CEO was a PhD; and the company had FDA approval for a dental laser. But the CEO had no business sense, agreements fell through, and the stock eventually went from about $30 per share down to a few dollars - also in the late 1990s. It got delisted and put on the pink sheets. Once again; both of these were stocks in viable/initially stable companies that got wiped out. Then there was SSE Telecommunications; that had government contracts to provide digital modem support for satellite communication. They were about $5 a share and they eventually folded. All three of these were carried as base recommendations at the time - by the Cabot Market Letter, Cutting Edge Technologies Letter, and the Undiscovered Stocks Newsletter, respectively; all in the 1990s. I lost just under $100,000 on viable NYSE/NASDAQ stocks - that the regulators have never had any restrictions on trading. So, trading is risky - regardless - and with my demonstrations outlined above - equally risky. Whether it is these stocks, or outright shorting stocks - where your risk is unlimited, or options - which can expire worthless, or futures - where you can owe more than you invested, or the leverage/unpredictability of currency pairs in FOREX - these inverse and/or leveraged funds provide no greater risk - than the stocks I was totally allowed to buy and lost almost all of my money in; during the "hay days" of the 1990s - before the tech bubble even blew in 2000. Yes; the losses by people {not me}, in XIV and SVXY on the night of February 5th, 2018 were significant - but not any worse; than in stocks of the 1990s that anyone could buy - because my $100,000 turn into about $10,000 - just as bad; as a worse case for XIV and SVXY in 2018. But consider; anyone in/before 1996 could buy CENT that became CNT; and also, have been wiped out in 1997 - and there were - and still are no restrictions on those kinds of purchases. In 2022; there were no restrictions in buying the tech movers like; Zoom, Meta, or Netflix - punished severely by May. There is no guarantee that purchases of any unrestricted stocks are really safe - short, and even long-term.