The Wall Street Journal recently highlighted investments of ongoing concern to Attorney Chris Vernon. Describing them as dangerous for retail investors, the Journal identified Non-Traded REITs as among the investments that retail investors should be wary of, here. As fixed-income investors seek better returns in this low-interest-rate environment, many are successfully pitched dangerous investments that pose as alternatives to traditional fixed income.
In reality, these products often carry far more risks than traditional fixed-income investments and, to make matters worse, investors are often not fully compensated for the high risks embedded in these alternative products.
As summarized by the Wall Street Journal, these products are “hard to understand, lack transparency, are expensive and don’t have proven performance records.” Some of the products that might fall into this category involve futures, foreign currency, options, liquid alternative mutual funds, non-traded REITs, Leveraged and Inverse ETFs, Structured Notes, unconstrained bond funds, TICs, BDCs, hedge funds, private equity, and many other products that fall into the alternative investment category.
According to reit attorney Vernon, who has represented investors nationwide for over two decades, the sellers of these products generally fail to highlight all the risks involved in these complex products, which may include liquidity risk, credit risk, spread risk, maturity risk, interest rate risk, crisis risk, complexity risk.
As a result, the perceived notion that you are avoiding market risk by buying these products is not only wrong but also glosses over other risks embedded in many of these products.
Vernon recommends that investors carefully choose the investment professional they deal with and also don’t hesitate to seek second opinions on any alternative product being recommended.