When in Doubt, Look for Simple Investments

Real Money’s Paul Price warns that complex investment vehicles do not always equate to profits.

Sticking to basics is often a good idea.

“On Wall Street, though, product sponsors go out of their way to create complex offerings for retail investors and institutions (who should know better).” Paul Price wrote recently on Real Money “These typically charge hefty management fees and commissions,” Price says.

This, Price suggests, is a problem.

“For example, on Oct. 2 Barrons.com posted an article suggesting less-than-simple alternatives to simple index investing…The assertion [in the article] that ‘hedge funds have had a banner year’ clearly did not jibe with the truth.”

Price continued “The graphic in the story said hedge funds have been, on average, returning 13% this year, but lagged the S&P 500, which returned 20% over the same time. I would ask: When did trailing the S&P by 35% become a “banner” year.”

“The piece went on to suggest “five alternatives to hedge funds that employed equally complex strategies…How have they done? Not very well. Year to date, only one of the five was within shouting distance of the major indexes performance.”

Price adds for good measure, “[c]ryptocurrencies are today’s hot investment area. That’s despite that nobody can make a case for what they are truly worth, if anything at all.”

“Stick with simple investment strategies that you understand. Your accountant, IRA and 401(k) balances will all thank you later.”

Does this mean that all complicated products are bad? Not necessarily.But simple and straightforward products clearly are competitive or even preferable. 

“Stick with simple investment strategies that you understand. Your accountant, IRA and 401(k) balances will all thank you later.”

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Provided by: The Street Retirement

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