According to the Wall Street Journal, Investors in L Bonds with GWG Holdings were shocked to discover that their money was being used to pay out old Investors while the Company was under investigation by the Securities and Exchange Commission.
Brokers and Advisors sold these L Bonds issued by GWG Holdings, which were speculative and risky illiquid investments. These Bonds had maturity dates of 2 to 8 years and paid between 5% and 8%.
To read more about GWG Holdings and the ongoing investigation visit: [ Ссылка ]
Considering these Bonds were non-rated the concern is “who would they be suitable for?” In general, only the most speculative investors, ones that are prepared for a total loss of their investment, should purchase non-rated bonds. There are hundreds of high-yield bonds traded on the exchanges or over the counter available for purchase. These issues are rated, although not very high but at least they are and in the industry, they are commonly referred to as “Junk Bonds”.
Even junk bonds have been reviewed by a rating agency. They have performed due diligence on the company. They have looked at comparable firms in the industry, and have a better understanding of the risks involved in purchasing these bonds.
Non-rated bonds on the other hand have had no such review. You and your broker are responsible for determining the risk.
Why would a broker or advisor recommend a client to buy a non-rated bond? Could there be more in it for them (such as a higher commission)? These are the questions you need to ask yourself when looking at risky investments.
The best way to protect yourself from mismanagement of your portfolio is to not invest in anything you do not understand. You can also have a third party review your portfolios such as a lawyer or CPA. We are also available to help.
If you suspect one of your investments might be at risk, call us, CPAA+. We do not manage investors’ funds; instead, we use our expertise to help keep you from becoming a victim of financial mismanagement. If you would like a free consultation, contact us at 412-370-8524 or sign up for our weekly blog, [ Ссылка ].
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