EDUCATING INVESTORS
Many of the largest brokerages, such as Merrill Lynch and Morgan Stanley Wealth Management, still do not allow their advisers to trade leveraged or inverse ETFs on their platforms because of concerns that individual investors do not fully understand the risks.
The way the multiplier affects long-term returns is "still the biggest part the retail investor doesn't understand," said Overland Park, Kansas-based independent advisor Brad Stratton. He had clients who lost money holding leveraged ETFs for as long as six months during the volatile and bearish 2007-2008 period, and now he is reluctant to follow the long-term strategy.
Stratton, who uses the ProShares Ultra S&P 500 and its inverse ProShares UltraShort S&P 500 ETFs, said he now prefers to keep his clients in the funds for no more than a week to 10 days.
That may be a while in the eyes of a Wall Street trader, but it is hardly the buy-and-hold strategy of a longer-term investor.