U.K. Regulators Eye ETFs; Will U.S. Watchdogs Follow?

[fundinvestguru]

Can ANYONE read any prospectus and assess all the possible outcomes of that investment? Probably not; that is speculation.

However, it is an absolute certainty that if interest rates on newly-issued US Treasury bonds of the same duration rise, those bonds will lose resale value. Where is that disclosed and why do so many financial advisors believe that that will not happen because interest rates have not risen from historic lows in the pas 28 years.

It is also an absolute certainty that a US Treasury bond FUND which continues to extend its average maturity each time a bond matures will lose MORE.

Where is the disclosure of interest rate risk in US Treasury bonds and, for that matter, where is Congress' disclosure of the very real credit risk at which our President and Congress is placing America's future creditworthiness by playing "chicken" with the rating agencies?

ETFs are subject to registration with the SEC which does a fine job of reviewing prospectuses.

Part of the speculation over ETFs' use is "experts" not differentiating between how individuals use ETFs and how professionals use ETFs. Rydex, ProFunds and Direxions offer nearly all of the inverse ETFs and leveraged ETFs. They servie a unique market and other ETFs should not be asked to carry the speculation about how investors who don't understand ETFs think investors use ETFs.

Let's acknowledge that passive buy-and-hold marketing of a limited menu of often-mediocre mutual funds has served retirement savers poorly.

I find it interesting that the financial press is always willing to publish the announcement of a new fund with an investment objective it has never achieved in real life and changes in portfolio managers and seldom writes an article on funds that have successfully managed high-return low-risk funds. Performance doesn't seem to be of interest except to criticize in the short-term.

[Bradly T.]

Good for the Brits!! Most of these should be closed to retail investors and any others with a brain and half a memory. The opening line is unfortunately false....most ETFs are NOT more liquid or tax efficient....that was merely the intent and promise originally. And most do NOT own a basket of underlying securites....which was originally true as well, but no longer. They are only as liquid as the bookie chits they hold are sound and have a market for....mostly unsecured promissory notes, read deriviatives, issued by other betters on the other side of the risk. Certainly GLD and others are actually long in hard assets or actual marketable securities. The point is it's a grave error to presume holdings or strategies in many...and there are many. The ETF industry has been hijacked by day traders and quant freaks and exchanges who live on volume - not results. Investors and their RIA fiduciaries have zero business exposed to these traders and their latest weapons of mass destruction. The wise guys have a new toy and they're at it again. Buyer beware indeed. I fear RIAs face extreme litigation and liability by overusing these merely to reduce client cost and hide their/our own fees - often 4 - 6 times more than the ETF fee. Cheap is NOT a fiduciary obligation....but it may well become the fiduciary's worst nightmare - ever. It better track and it better be liquid and you better understand it....all.