Monthly Archives: May 2014

BlackRock Inc. (BLK)’s Laurence D. Fink oversees the world’s biggest exchange-traded fund lineup. Fink says, “BlackRock would never do a leveraged ETF and he doesn’t understand why the U.S. Securities and Exchange Commission allows them to operate.”

Becoming increasingly complex as firms try to appeal to a more diverse base of investors, ETF’s have turned into one of the most popular investing vehicles over the past decade. Leveraged ETF’s use swaps or derivatives to try to amplify daily index return, while the majority of ETF’s mimic indexes. Leveraged and inverse ETFs have come under scrutiny, the SEC warned brokers and investors that the vehicles weren’t appropriate for long-term investors, over several issues since 2009.

Jordan Belfort, a motivational speaker, is planning on using his earnings from a speaking tour to repay $50 million to the investors he wronged during his time as a broker, which was characterized by the film “Wolf of Wall Street”.

He is expected to make around $100 million this year, but will only be repaying back his share of the fine, which is $50 million to the victims of his fraud.

“After six months of putting all the profit from the U.S. tour into an escrow account, it will go directly back to investors,” Belfort said. ”Once everyone is paid back, believe me I will feel a lot better.”

Investors wanting larger yields have been putting their money into so-called nontraditional bond funds, unaware of the added risks they can pose. Danielle Donahoes, president of Rinehart Wealth Management in Charlotte, N.C., says “Investors think fixed income and they think bonds and they think safety, but in many cases nontraditional bonds mean buying instruments that have a more risky profile”. U.S. Treasuries and high quality corporate bonds tend to dominate the fixed income markets and are considered ultra-safe. Nontraditional bond funds on the other hand can be invested into the debt of lower-rated companies, emerging-market government bonds and other securities that offer higher yields, but greater risks. Investors looking to allocate money for their fixed income clients should spread their investment across six or seven different segments of the bond market, where the risks and rewards look clearer.

Investors are better off in diversified portfolios of traded REITs than the underperforming non-traded REITs, because non-traded REITs are high cost, contain lack of transparency, illiquidity, & many times are a conflict of interest. It is wiser to go with a lower risk, higher return alternative. Many broker/dealer firms still buy into the stories of non-traded REITs because they blindly believe the SEC filings, the independent due diligence reports are more important. The audit , SEC filings and independent boards do nothing to protect investors from bad or untimely business plans or poor investment structures.

Since the market was slammed by the financial crisis six years ago, retirement investors are putting more money into stocks. In March, stocks made up 66% of the assets in the 401 (K)s  surveyed by Aon Hewitt, up from 48% in February 2008. Large investors such as pension funds, banks and insurance companies are showing less appetite for risk. New rules have allowed employers and the companies that oversee their retirement plans to steer employees into investments know as target-date retirement funds, which tend to be heavy in stocks, when the employees don’t make their own choices. IRA’s also have seen increased signs of risk taking this year.