Mutual Funds 101
Mutual funds are sold by companies that pool money (capital) from many investors. This capital is then invested in bonds, stocks and/or other securities. Investors in the fund all have shares, and these shares represent a part of the fund’s holdings.
If you’re interested in making an investment, a mutual fund may or may not be the right choice for you. Like all investments, they come with many different levels of risk. They aren’t insured or guaranteed by financial institutions or government agencies, even those sold by banks. However, because mutual funds are often a mix of various bonds and/or stocks, the risk is some mutual funds is “spread out” or diversified. That said, some mutual funds are not diversified, and it is important to understand that a mutual fund investment can be very high risk, or very low risk, depending upon the holdings and the goals of the fund. Each fund must be looked at individually to determine if it is appropriate for the investor, in the same manner as any individual stock or other investment.
Mutual funds are managed by professional fund managers. These managers invest the money investors contribute into individual stocks, bonds and other securities. And because mutual funds buy and sell securities in large amounts at one time, they usually incur fewer fees, thus operating in a cost-efficient manner. However, it is very important to carefully examine prior to purchase all of the fees and costs associated with the fund you are purchasing as they can vary greatly and take a significant bite out of your return.
If you feel your financial advisor placed you in inappropriate mutual fund investments and/or failed to disclose the fees and costs associated with investment or that the underlying holdings of the fund were beyond your tolerance for risk, you may have a case. Call Carlson Law at 858-544-9300 for a free consultation.
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Recently, many investors have experienced significant financial loss in their securities accounts because of the inappropriate and improper trading of exchange traded funds (ETFs) by their stockbrokers.
A number of leveraged and inverse ETFs, including some funds by Direxion and Proshares, had risk associated that may not have been fully disclosed to some investors. Although these ETFs were built to seek out multiples of the exchange that they were created to track, many were also structured to reset daily. The result is radical disparities in their performance in the long term compared to the index that they were intended to follow.
Often, stockbrokers did not tell their clients about the extremely risky nature of holding these types of funds for any period of time, a risk that the Financial Industry Regulatory Agency (FINRA) clearly recognizes. In a June 2009 Regulatory Notice (09-31), FINRA underscored the high-risk character of these ETFs, asserting their unsuitability for many investors that intend to hold them for longer than one trading session, especially if the markets are volatile.
Have you incurred financial loss due to your broker’s advice on leveraged or inverse ETFs and/or the amount of time you were advised to hold those funds? Contact Carlson Law to discuss your potential claim with an experienced securities attorney today at 619-544-9300 or www.securities-fraud-attorney-san-diego.com
Tags: ETFs, financial loss, FINRA, high-risk securities, inverse ETF; Direxion, investment loss, investment recovery, leveraged ETF, Proshares, Securities Attorney, Securities Fraud, Securities Fraud Attorney San Diego
Posted in Broker Fraud, Fiduciary Duty Breach, Investment Fraud, Negligent Misrepresentation, Securities Arbitration, Securities Fraud, Securities Law, Securities Litigation, Stock Fraud, Stock Loss | Comments (1)