I just read yet another very damaging article by yet another journalist paid to publish. The writer buys into commonly held investment myths and, by doing so, is just contributing to the destruction of people’s financial futures. The title of the article is “For some investors, commodity ETFs and ETNs are the answer.”
ETFs and ETNs are relatively new Wall Street products into which huge amounts of people’s money are now being invested. Unfortunately, these new and highly sophisticated instruments are just one more example of the never-ending game played by the financial services industry. This game has only one rule: the financial services industry must always win, regardless of whether or not you, the investor, do.
Among its ways to win, the industry constantly reinvents itself to continually take people’s money—and this current ETF/ETN situation is no exception. Regarding this article, I ask: Where is the mention that these investments frequently cause big losses, even if the asset class goes up?! The losses happen because these investments frequently own no commodities whatsoever, just future rights to buy those commodities. The cost of these contracts are very substantial and never-ending and it’s not uncommon that even if the price of the commodity goes up you lose money, and often a LOT of money. Of course this information is not publicized.
For more about this ETF and ETN scam, read this Business Week article.
The bottom line is very clear: People can and should invest in simpler investments like no-load, broad-based index funds by themselves, without the need for guidance from so-called financial experts, whose advice is proven not to work.