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Does making money in today's volatile market require risk taking investment? ent and alert buying and selling?

I am 85 years old and a retired widow.with very small pension and minimal Social|Security. In today's market, how does one determine a sound investment?? My market investments are all I have to live on. I need a good rate of return every year. I cannot wait 10 years for my investments to prove themselves. If my investment advisor is diligent, can he not take risks while being alert in frequent buying and selling at the best price? Are covered calls a viable option in risk taking? My investment counselor is buying gold, and creating a lot of activity in my portfolio..

I chose my IC because he does handle millions, but is also concerned with and personally helpful to the little guy. He has written 4 books, has a radio program out of Toledo, Ohio. Additionally, he required that my entire family be present for the 3 hours that he first met with us to explain his services and how he would handle my portfolio. His credentials are impeccable, and all of his presentation papers were well laid out for all of us to study and to pass judgment on. He came to me highly recommended by a multi-millionaire friend of mine. and I have been impressed by his honesty and integrity as I have been able to determine it.. He has been a thoughtful and personal advisor in how to help my son who has 4 children but was without a job for a year. He laid out a plan and guidelines for me to help my son and his family through the crisis and saw to it that I was financially able to supply their needs.

Jan 10, 2012 by Carol from Archbold, OH in  |  Flag
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Hello Carol,

Unfortunately, investing always requires at least some level of risk. In fact, any return you get in the market is compensation for taking such risk. While some investments are considered relatively safe, the returns you receive from them may not keep pace with inflation. So in this scenario, while the possibility of losing your principal might be lower, you are more likely to lose purchasing power over time. On the other hand, other investments may provide higher returns but may cause you to lose at least some of your principal. So essentially, risk and reward are very closely related, no matter what some salespeople may tell you. In summary, high returns usually equal high risk, and low returns generally equal low risk. There are no free rides in the market.

One way to lower risk is to be diversified, which means owning securities from different geographies, asset classes, and risk levels. Putting too much of your portfolio into one idea, such as gold, may not necessarily be the best decision.

You asked about options. Options carry their own risks and should not be invested in without careful consideration of the possible downsides.

You also mentioned that your advisor is creating a lot of activity in the account. I am curious as to how this advisor is compensated. If he is being paid through commissions, then this activity may be an indication of churning within your account. Churning is the act of creating excessive and unnecessary activity within an account to increase commissions.

Churning is something you can avoid by working with fee-only advisors, who are not compensated through commissions and accordingly have no incentive to generate unnecessary orders.

I wish you the best. If you have any additional questions, please feel free to reach out.

Comment   |  Flag   |  Jan 10, 2012 from Staten Island, NY

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Barry Rabinowitz Level 19

Hi: for a 85 year old I do not think gold is an appropriate allocation for you. It does not generate income. I would recommend dividend paying stocks and bonds. No advisor can time the market-know when to buy and when to sell. Bernie Madoff also had impeccable credentials. I would suggest that you get a 2nd opinion. In investing there is no free lunch. It is not possible to generate high returns without taking risk.

Comment   |  Flag   |  Jan 10, 2012 from Fort Lauderdale, FL

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First and foremost Gold is a commodity and all commodities are just as if not more volatile than stocks. Another idea for you may be preferred stocks. These are stocks solely issued for a dividend not growth. Their risk level is higher than bonds and lower than stocks. You can even buy an Exchange Traded Fund with 50 or so different issues inside of it.

Comment   |  Flag   |  Feb 13, 2012 from Cleveland, OH

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Richard P Taylor Level 17

Carol, I agree with a lot of what has already been said in previous answers. In reference to your concern about your advisor: I am sure that he/she is a very good and successful advisor. However, I have found in my career that very large (successful) advisors all have one issue that has to be dealt with. They attain huge numbers of clients. When you have say 1,000+ clients it becomes very difficult to manage each client with the attention that one would expect. This is not to say that the advisor is not good at what they do. It is to say that they are human beings and we can only do so much in a day.

Comment   |  Flag   |  Jul 22, 2015

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"If my investment advisor is diligent, can he not take risks while being alert in frequent buying and selling at the best price?"

That's what a trader attempts to do. It's different than what an investment manager should do for most clients, including ones that meet your description. There are some people that are good trader though, so it cannot be discounted completely. I don't believe that you can expect him to do this well consistently.

Comment   |  Flag   |  Jul 25, 2015 from Austin, TX

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