Yesterday’s Mad-as-Hell Topic prompted today’s recommendation for investors. There was something about two of the articles that piqued my interest:
The words, ‘certain products’ that prompted the SEC to “blast” and FINRA to issue an investor alert. Let me list the names of these ‘certain products’:
- Reverse convertible notes with an imbedded put option
- Structured products
- Complex products
- Derivatives
- Junk bonds
- Floating rate bank note funds
- High-yielding products
- Complex vehicles
- Leveraged products
- Hedge funds
- Reverse exchangeable securities
- Leveraged and reversed ETF’s
These ‘certain products’ are used to do two things and two things only:
- Chase higher returns for the uninformed investor…that most times do not materialize.
- Build wealth for advisors and the financial services industry.
As an investor, do you have any idea what any of these products are, who creates them, how they’re created or what their risks/fees are? I would be willing to bet the vast majority of those that consider themselves financial advisors have no clue…only that they pay a lucrative commission or fee.
Here’s the bottom line: These ‘certain products’ are all created by the financial services industry and most are part of a ‘zero-sum’ game with a winner and loser. In other words, for each and every dollar of profit someone makes, there is someone who loses a dollar. I’ll let you guess who the pre-determined winners and losers are.
So, here are our recommendations to the average retail investor (which 99% of us are):
Do This – Invest with simplicity and safety in mind utilizing the following: Stocks, High Quality Bonds, Cash, R.E.I.T.’s, or low-cost passively-managed index funds or Exchange Traded Funds (ETFs).
Not That – Invest in any unknown ‘certain products’ that sound like “sure winners”. Products that promise higher rates of return mean the following: high risk, high fees, low transparency, less liquidity, POOR RESULTS.
Every investor owns their power of choice and The Self Empowered Investor hope they exercise it wisely!