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July 10, 2013

Alternative Mutual Funds Becoming Risky

Alternative mutual funds have become increasingly popular and have caught FINRA’s attention. FINRA recently issued a warning to investors to take caution when investing in alternative mutual funds because they are risky. An investor first needs to educate him or herself before investing in alternative mutual funds because the rewards do not always outweigh the risk. According to FINRA, alternative mutual funds have the most beneficial return when the overall market is doing poorly, but when the market is doing well the benefits barely outweigh the risk. U.S. News advises, “… use three criteria to judge alternative funds: size (the bigger, the better, so lack of liquidity isn’t a concern), fees and track record.” Conducting appropriate due diligence may help minimize the risks of investing in alternative mutual funds.

To read more, visit finra.org