Investors should be the one to decide how their money should be invested, not the regulator. At the same time, we should prevent investors from harming themselves and encourage them to do what is practically optimal.
In my experience of using complex products in my portfolio, I'm 100% confident that nearly all investors will harm themselves using inverse funds and leveraged products that target complex assets such as commodities/equity sectors/alternative assets. Even if they understand them, the costs don't justify holding them regardless of time horizon. These products, especially those in the form of an ETN, should be heavily hidden behind a "wall of advisors or tests." However, leveraged products that target big established index such as S&P, Russell, and any that tracks bond assets should remain accessible to everyone. Educating investors on how to use the good products is far more do-able.
Good leveraged products give investors massive amount of flexibility to build their portfolio. It has allowed retail investor, like me, to build leveraged mean variance portfolio in casual manner. They made have a higher cost hurting risk-adjusted return, but the casual part is important because to DIY a portfolio equivalent to a leveraged ETF takes a meaningful chunk of time. Thanks to LEFT, I can pay someone else to free up my time for other life activities. If there was anything I could change about these products to make them better, I would reduce the expense ratios as well as provide investors with different resetting frequency.
In conclusions, most leveraged and all inverse funds, especially those in the form of an ETN, should be hidden behind a wall of advisors or barriers. Funds that target bonds or big market indexes ought to remain accessible to everyone.
Tien Doan Comment On Regulatory Notice 22-08
Investors should be the one to decide how their money should be invested, not the regulator. At the same time, we should prevent investors from harming themselves and encourage them to do what is practically optimal.
In my experience of using complex products in my portfolio, I'm 100% confident that nearly all investors will harm themselves using inverse funds and leveraged products that target complex assets such as commodities/equity sectors/alternative assets. Even if they understand them, the costs don't justify holding them regardless of time horizon. These products, especially those in the form of an ETN, should be heavily hidden behind a "wall of advisors or tests." However, leveraged products that target big established index such as S&P, Russell, and any that tracks bond assets should remain accessible to everyone. Educating investors on how to use the good products is far more do-able.
Good leveraged products give investors massive amount of flexibility to build their portfolio. It has allowed retail investor, like me, to build leveraged mean variance portfolio in casual manner. They made have a higher cost hurting risk-adjusted return, but the casual part is important because to DIY a portfolio equivalent to a leveraged ETF takes a meaningful chunk of time. Thanks to LEFT, I can pay someone else to free up my time for other life activities. If there was anything I could change about these products to make them better, I would reduce the expense ratios as well as provide investors with different resetting frequency.
In conclusions, most leveraged and all inverse funds, especially those in the form of an ETN, should be hidden behind a wall of advisors or barriers. Funds that target bonds or big market indexes ought to remain accessible to everyone.