More Risk Investing In ETF Than Mutual Fund, Says NASAA
The Exchange Traded Fund (ETF), less costly than a mutual fund, has its own set of risks cautions the North American Securities Administrators Association (NASAA). The NASAA recommendations come amidst the growing investments in ETFs.
Investors can diversify an ETF portfolio just like that of a mutual fund and it can be traded during the day. This makes ETFs a big hit with investors. But, regulators are worrying, as many inverse ETFs are marketed to bearish investors so that they can bet against the broad market. Similarly, numerous leveraged ETFs are sold to investors wanting to take extra-large bets when they are bullish.
Although the fee of an ETF is lesser than that of a mutual fund, it has costs like the difference between the buying and selling price of an ETF. Also, not all ETFs survive as long as mutual funds, leading investors to pay redemption fees at times. One ETF closed this year and six have announced closures. Conclusively, investing in a mutual fund remains a safer bet.