It is an outrage that FINRA is considering limiting these powerful wealth building tools for non-high-net worth individuals. Leveraged Funds have provided some of the most attractive returns over the past ten years, and will almost certainly continue to provide attractive returns as long as global capital markets continue their long bull runs.
These tools maybe be incorrectly used by uneducated, reckless retail investors to some harm to their finances. However, it is totally unclear to what extent that may be true. What is clear is that backtests of leveraged multi-asset portfolios (first theorized by Clifford Asness) can provide attractive returns (comparable to large cap stock portfolios) while limiting volatility.
Additionally, I request that a FINRA regulatory analyst complete a backtest of a quarterly rebalanced portfolio of 55% $UPRO and 45% $TMF (roughly a 3x leveraged 60/40 stock/bond portfolio). Back tests completed to 1987 have indicated average returns nearly double the S&P 500. Please visit https://www.optimizedportfolio.com/hedgefundie-adventure/ for more detail.
Roth IRA income and contribution limits ($6,000) prevent middle income savers from being able to invest the amount of money that would allow them to generate substantial returns for retirement. At a minimum, these funds allow smaller retail investors to create significant exposure to strong performing assets.
It is also totally ridiculous that FINRA has created disclaimers to warn retail investors from buy and hold strategies on leveraged funds. Yes, the volatility is intense, but from its inception in june of 2009, UPRO's per share price has risen from $1.20 to $50. Any retail investor who invested their entire ROTH IRA contribution into this vehicle during this exceptional period has seen their financial fortunes change, and the radical volatility was worth the risk.
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Rolf Witt Comment On Regulatory Notice 22-08
It is an outrage that FINRA is considering limiting these powerful wealth building tools for non-high-net worth individuals. Leveraged Funds have provided some of the most attractive returns over the past ten years, and will almost certainly continue to provide attractive returns as long as global capital markets continue their long bull runs.
These tools maybe be incorrectly used by uneducated, reckless retail investors to some harm to their finances. However, it is totally unclear to what extent that may be true. What is clear is that backtests of leveraged multi-asset portfolios (first theorized by Clifford Asness) can provide attractive returns (comparable to large cap stock portfolios) while limiting volatility.
Additionally, I request that a FINRA regulatory analyst complete a backtest of a quarterly rebalanced portfolio of 55% $UPRO and 45% $TMF (roughly a 3x leveraged 60/40 stock/bond portfolio). Back tests completed to 1987 have indicated average returns nearly double the S&P 500. Please visit https://www.optimizedportfolio.com/hedgefundie-adventure/ for more detail.
Roth IRA income and contribution limits ($6,000) prevent middle income savers from being able to invest the amount of money that would allow them to generate substantial returns for retirement. At a minimum, these funds allow smaller retail investors to create significant exposure to strong performing assets.
It is also totally ridiculous that FINRA has created disclaimers to warn retail investors from buy and hold strategies on leveraged funds. Yes, the volatility is intense, but from its inception in june of 2009, UPRO's per share price has risen from $1.20 to $50. Any retail investor who invested their entire ROTH IRA contribution into this vehicle during this exceptional period has seen their financial fortunes change, and the radical volatility was worth the risk.