Investment Basics

Those who play the financial markets are only there for one reason: to make money. So an absolute return sounds pretty excellent...or does it?

The term seems fairly straightforward: invest some money, absolutely get an absolute return. For that reason, the absolute return mutual funds markets are growing, but the case may stand that traditional stocks are better in both the short and long-term for personal finance investors.

Why? Well, it was risky trading that led to the financial crisis, and though we seem to be getting back to where we once were, financial advisers and investors are still advising caution within the market. For one thing, investors know very little about how absolute-return funds work. If your financial planner can't explain them to you, chances are because he doesn't understand how they work himself...and that means that your money is at risk.

You could shop around for an investment adviser that does understand how they work, or you could just stick with the partnership you've created and go with what you know will benefit your retirement savings. After all, that fee-based financial planner only makes money when you do, so it's in his best interest to get you results.

The nitty gritty of absolute-return funds is this: the funds purportedly produce positive returns in all market conditions by investing part of the money in low-volatility investments and combining that with results that may not mirror the movements of the market by buying some stocks early and short-selling others. If it sounds confusing, it is: best left to the pros.

Find a certified financial planner today!