Wednesday, July 13, 2016

Complicated Investing Made Simple

The Financial Industry Regulatory Authority (FINRA) recently fined Oppenheimer & Co nearly $3million for selling complicated leveraged and inverse exchange-traded funds to retail customers who should never have been in such high-risk, complex investment vehicles.

"Investors, especially older investors, want yield, but also safety, and right now bonds don't provide sufficient yield, and stocks don't give them enough safety," explains Brad Bennett, FINRA's enforcement chief.

Real estate may be a safer investment than securities in the sense that most investors understand housing. Investors know how to add value to real estate to increase yield, or may lend private money at a fixed rate of return higher than what is offered through traditional securities.

Here is a concept easy enough for most investors to understand: lend money to a real estate investor for a fixed rate of return for a fixed period of time, in much the same way that banks lend money to borrowers for a thirty-year fixed rate mortgage. Both are secured by collateral in the real estate being funded. Simple. Want to know more?

The moral here is to stay out of any investment you don't understand!

Happy Investing!

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