Fidelity Joins Growing Chorus on Leveraged ETFs

Fidelity Investments has joined the growing chorus of fund companies, brokerages and regulators warning investors about potential outsized losses in leveraged exchange-traded funds due to the effect of compounding.

“Leveraged products are complex, carry substantial risks and are intended for short-term trading,” Fidelity warns investors on its website. “Most reset daily and seek to achieve their objectives on a daily basis. Due to compounding, performance over longer periods can differ significantly from the performance of the underlying index.”