A new type of risky Exchange Traded Fund (ETF) is available starting this week to U.S. investors as the markets grow more volatile. These are very different from most ETFs, which typically invest in a large number stocks like a mutual fund. By contrast, single-stock ETFs now are being introduced to the market that take leveraged or inverse positions on a single stock. These leveraged single-stock ETFs are not intended for long-term investing. They mimic the performance of an ETF each day times a certain multiple, such as 2x or -2x the performance, for example.

Key Takeaways

Leveraged single-stock ETFs are not meant for buy-and-hold investors, but for short-term positions.

The SEC has warned that these complex products are high-risk and volatile, but is divided in its support for them.

These assets should be used by people with a strong understanding of investing and a high-risk tolerance.

FINRA is calling for regulators to revamp their oversight and require a knowledge test for investors interested in using single-stock ETFs.