Exchange traded funds: Which kind are you buying?
Several years ago, we issued an Investor Alert that talked about the fact that income trusts were, in fact, not fixed income investments. At that time, we were concerned that too many retirees were investing in income trusts because they thought that these products would provide ongoing income.
Recently, we decided to issue information regarding exchange-traded funds (ETFs). In this case, we were concerned that people didn’t understand that this term is used to describe a whole category of products, some very risky, some not so risky. We pointed out that investors should determine what type of ETF they are considering and if it was a ‘leveraged’ or ‘inverse’ ETF, they should think twice. Both of these products are better suited to professional investors rather than retail investors. Professional traders use these short-term trading vehicles to speculate or to hedge other positions they hold.
If you know about products that are being introduced to retail investors that require a better understanding of its risk, please don’t hesitate to respond to this blog or to email us with that information. We’ll take a look at the product in question, and if we also have concerns, we’ll issue information outlining the risks and outlining key information that will help an investor make an informed decision.