The Grass Isn’t Always Greener—Chasing Return in a Challenging Investment Environment

When investors face a difficult investing environment, like periods of low yields on fixed-income investments or volatility in the stock market, what's an investor to do? Some investors may opt to "chase return," meaning they put their assets into riskier and sometimes esoteric products that promise higher yields and returns than they can obtain in more traditional investments.

FINRA is issuing this alert because investors may not realize that they could be taking on more risk if they invest in products with higher returns. This alert discusses different ways investors have sought to increase their return ranging from easily understood investments like high-yield bonds to complex vehicles like structured products and floating-rate loan funds. More importantly, this alert serves to remind investors that when they invest in products that promise higher returns they are nearly always taking on more risk.

A Challenging Environment

Investors have experienced a volatile stock market, two significant bear markets and historically low fixed income yields over the last decade. This combination of low interest rates, stock price volatility and multiple bear markets has sent many investors looking for higher and more consistent returns. However, before you move your assets to another investment, there are several questions you may want to ask.