In a low-interest rate environment, or even with negative interest rates, planning for retirement is tough.
We can set aside more money for the future or simply kick the can down the road.
Neither is an attractive proposition.
We might get extra return if we invest in alternative assets but this path entails a great deal of risks.
There is no such thing as a fail-safe investment when you deal with risky financial products, which can only be profitable if you make the right bet.
The Wall Street Journal reports that US securities regulators are preparing a civil enforcement case against Merrill Lynch for selling a structured investment product that at some point lost as much as 95 percent of its value.
The action stems from its Strategic Return Notes offering, resulting in massive losses for investors, according to investigators.
About US$40 billion to US$50 billion of complicated custom-made derivatives were sold primarily to retail investors in the US each year.
Most of these small investors did not know how these products worked, let alone how they were supposed to perform in different market situations.
To avoid falling into such traps, especially in a low-yield environment when investors are hard pressed to find something with a reasonable return, investors should understand what they are buying into.
They should ask themselves whether the risk-reward nature of a financial product fits their needs.
This article appeared in the Hong Kong Economic Journal on Jun 24
Translation by Raymond Tsoi
[Chinese version 中文版]
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