Tags: ETF | investments | risk | funds

WSJ: 5 Investments You May Regret

By    |   Monday, 14 July 2014 03:07 PM

Liquid-alternative mutual funds, leveraged exchange-traded funds (ETFs), non-traded real estate investment trusts (REITs), structured notes and unconstrained bond funds all are asset classes that have seen an influx of investor cash in recent months.

But beware, warns The Wall Street Journal. These investments are "hard to understand, lack transparency, are expensive and don't have proven performance records."
  • Liquid-Alternative Funds. These use strategies designed to replicate hedge funds. The idea is to gain diversity and downside protection.
Editor’s Note: Retire 10 Years Earlier With These 4 Stocks
  • Leveraged ETFs. They use borrowed money so that the price of the ETF moves by a multiple (often two times) of the magnitude of the underlying index.
  • Non-traded REITs. These are REITs that don't trade on public exchanges. Their yields run as high as 7 percent, compared with 3 to 4 percent for standard REITs.
  • Structured Notes. These are debt securities whose return is linked to the performance of other assets, such as a stocks, bonds, currencies or commodities.
  • Unconstrained Bond Funds. Also known as go-anywhere funds, they can invest in any bond in any market. The idea is to boost returns and curb risks.
"Anything that is complicated is not something that the typical investor should buy," Samuel Lee, an analyst at Morningstar who specializes in ETFs, tells The Journal.

"There are more opportunities for sophisticated players to take advantage of you."

Meanwhile, MarketWatch columnist Chuck Jaffe cites several risks you should be aware of when investing:

1. Market risk.
2. Inflation risk.
3. Interest-rate risk.
4. Shortfall risk. That is the risk that you won't make as much money investing as you had planned.
5. Special-situation risk. That's the risk that you'll have to devote money to a special situation, like a sickness or college tuition.
6. Timing risk.
7. Liquidity risk.
8. Political risk.
9. Societal risk.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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Liquid-alternative mutual funds, leveraged exchange-traded funds (ETFs), non-traded real estate investment trusts (REITs), structured notes and unconstrained bond funds all are asset classes that have seen an influx of investor cash in recent months.
ETF, investments, risk, funds
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2014-07-14
Monday, 14 July 2014 03:07 PM
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