TAG | high-yield investments
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In an article from InvestmentNews.com, on July 25, 2011, Dan Jamieson writes that FINRA has warned investors about chasing yield with structured products, junk bonds and floating-rate bank-loan funds.
The Financial Industry Regulatory Authority (FINRA) issued an investor alert about the risks found in these and other products. The alert was prompted by “significant recent inflows” into high-yielding products, Finra said.
“Investors should always look behind an investment’s yield, ensure that they understand how the investment works and carefully consider its fees and risks before investing,” Gerri Walsh, vice president for investor education, said in a statement.
The structured products “can have significant drawbacks such as credit risk, market risk, lack of liquidity and high hidden costs,” the alert said.
Jamieson goes on to say that FINRA warned investors to watch for structured products that are callable, promise principal protection or have returns based on changes in the yield curve. While such investments could produce attractive returns, they also might “earn no return for the entire term of the note,” the alert said.
Also, FINRA warned that the market for floating-rate loans is “largely unregulated, relatively illiquid and difficult to value.”
The InvestmentNews.com article adds, FINRA says that floating-rate bank-loan funds may be less vulnerable to interest rate fluctuations, as well as offering inflation protection. The underlying loans, however, are “are subject to significant credit, valuation and liquidity risk.”
Securities Attorney, Lars Soreide, of Soreide Law, PLLC, has represented clients nationwide. If you or a family member have lost your investments through these risky investments, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses. To speak with an attorney, call 888-760-6552, or visit www.securitieslawyer.com.
Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
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