Have you heard of this new more connected investment package? In early March, Credit Switzerland has launched a negotiated note (ETN) called 2 x loan credit Switzerland fusion liquid arbitration monthly index (symbol CSMB) with the celebration of ringing the Bell of openness to the New York Stock Exchange. It is "the first product to provide 2 x monthly exhibition leverage strategy arbitration fusion in a format negotiated," according to the press release.
When I saw this, the alarm went off in my head. I was wondering how many investors really need this product. How it works? The heck what? The press release is filled with gibberish so that it is difficult to say.
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If we learned anything from the financial crisis of 2008, it is this: the more complex an investment strategy, the possibility is more there for something bad to happen. Don't forget backed bonds? Banks and other investment firms buy these portfolios sub-prime lever effect, including higher than regular mortgage interest rates. They have worked fine until broke out it of the housing bubble.
Another example is securities auction-rate preferred, which have been sold as an alternative to the money market fund. These products also ran into trouble during the credit crisis.
I realize that my investment strategy of using vacuum of mutual funds and asset allocation - your money spread among investment types and rebalance regularly - is boring. It is about as entertaining as watching paint dry.
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However, our strategy works well in any market condition. The mutual funds that we use are sensitive in the good times and bad. Yes, stock funds lost money in the financial crisis, but they returned. And I can explain to investors how other types of funds could help offset stock declines.
I understand how investors can get bored when they hear the same strategy and investment again and again. After I broke my elbow, at first I said exactly what happened. I was skating aligned with my daughter and try to show by rotation around when I fell and landed on my elbow. Before long, I am tired me tell the real story and get the same answer that it was something stupid to do so. Therefore, I have found with some crazy explanation, as I fell by repairing a solar panel on the space shuttle. I have all just to be funny.
[See Bill Gross of PIMCO clever in Active ETFs].
Wall Street likes to invent new mechanisms for investors, too. But the most recent and exotic investments as credit Switzerland ETN not really funny step. It's your money and you shouldn't mess with it.
Remember, just because a product is cool sounds does not mean that it is a good investment. If your Advisor can explain the strategy and the make-up of the securities, or if you do not understand the investment after listening to the explanation or read the prospectus, I urge you to seek investment and an investment strategy that you understand.
Adam bold is the founder of the mutual fund store, which provides advice for fresh investment only with locations Ocean to another. He is also the host of the mutual fund Show, a radio show broadcast across the country. Bold is the author of The Truth book bold investment (April 2009). Bold is Chief Investment Officer of the Centre of research of mutual fund, a registered at SEC investment advisor which provides for mutual funds and asset allocation recommendations and research to stores in the mutual fund store.
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