ETF

ETFs: The Most Dangerous

Stock quotes in this article:UNG, DTO, USO 

Normally, futures-based and leveraged products like UNG and DTO would be appropriate for sophisticated investors who understand the underlying risks. Because of the regulatory uncertainty, however, these products could be dangerous to any investor if requirements suddenly change.

As ETF assets grow, and exciting new products make their debut, it is an exciting time to invest in the ETF industry. New issuers are offering the next generation of ETF products, while increased competition is helping to drive down fund fees.

Investors can safely participate in this environment by following a few basic rules. First, make sure you understand the objective of any fund that you invest in. Secondly, make sure you understand how that ETF plans to achieve its objective. Third, make sure the fund has adequate liquidity and investor interest to make trading safe.

Enjoy the increasing selection of ETFs and avoid dangerous funds.

-- Written by Don Dion in Williamstown, Mass.

>To order reprints of this article, click here: Reprints

At the time of publication, Dion had no positions in the stocks mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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