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Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  Mom&Pop + Complex Investments = Date:  2/11/2013  11:31 AM
Author:  WendyBG Number:  415604 of 536512

Complex Investments Prove Risky as Savers Chase Bigger Payoff
New York Times: February 10, 2013

Regulators across the country are confronting a wave of investor fraud that is saddling retirement savers with steep losses on complex products that until a few years ago were pitched only to the most sophisticated investors.

The victims are among the millions of Americans whose mutual funds and stock portfolios plummeted in the wake of the financial crisis, and who started searching for ways to make better returns than those being offered by bank deposits and government bonds with minuscule interest rates.

Tens of thousands of them put money into speculative bets promoted by aggressive financial advisers. ...

The money that retail investors have in alternative investments in the United States, ranging from baskets of commodities to mutual funds that employ sophisticated trading, more than doubled from 2008 to 2012, to $712 billion from $312 billion, according to McKinsey & Company. Many of the products hold out the promise of higher returns while ostensibly being immune to the volatility of stock markets. ...
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Private business placements and nontraded REITs are among the most dangerous.

However, all investors should remember that nobody can beat the Fed and the markets over a long span of time. Rising reward entails rising risk.

Anyone who says that they have a system to get higher-than-market reward without higher-than-market risk -- hang up the phone as fast as possible because the salesman is getting paid to set a trap for you...even if he somehow believes his own story line.

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