Promises of higher investment returns usually means higher risk
SEATTLE -- This is a tough time for anyone with money to invest. The stock market is volatile, Treasury Bills pay almost nothing and most savings accounts are a joke.
It may be tempting to move your money to an investment that promises a higher and more consistent return.
Before you do anything, make sure you know if that higher return means a higher risk.
You also want to know the costs associated with that new investment. That can dramatically lower the return you see featured in the ads.
Gerri Walsh with the Financial Industry Regulatory Authority says it's not always easy to tell how much those fees will run.
"One of the things that we've noticed about some of the more complex products that are out there that are promising potentially higher returns is that some of the costs are actually built in to the pricing of the vehicle itself," Walsh said. "So it can be very difficult to compare costs across the different kinds of investments, because some of them are built into the pricing and some of them are additional fees or commissions you pay on top."
Walsh says you also want to know how long it will be until you can get your money out of that investment.
"Some investments that have higher yields tend to be longer-term investments and there might not be a liquid second market for it. That means if you want to get your money out of the investment, you are stuck."
More Information:
The Grass Isn’t Always Greener—Chasing Return in a Challenging Investment Environment
It may be tempting to move your money to an investment that promises a higher and more consistent return.
Before you do anything, make sure you know if that higher return means a higher risk.
You also want to know the costs associated with that new investment. That can dramatically lower the return you see featured in the ads.
Gerri Walsh with the Financial Industry Regulatory Authority says it's not always easy to tell how much those fees will run.
"One of the things that we've noticed about some of the more complex products that are out there that are promising potentially higher returns is that some of the costs are actually built in to the pricing of the vehicle itself," Walsh said. "So it can be very difficult to compare costs across the different kinds of investments, because some of them are built into the pricing and some of them are additional fees or commissions you pay on top."
Walsh says you also want to know how long it will be until you can get your money out of that investment.
"Some investments that have higher yields tend to be longer-term investments and there might not be a liquid second market for it. That means if you want to get your money out of the investment, you are stuck."
More Information:
The Grass Isn’t Always Greener—Chasing Return in a Challenging Investment Environment
