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How To Select A Financial Advisor: The Least You Should Know (Part 18 In eBook Series)

How To Select A Financial Advisor: The Least You Should Know (Part 18 In eBook Series)

Chapter 18: ODDS AND ENDS

Two investment vehicles which have not been discussed thus far:

1) Exchange-traded notes

2) Non-traded Real Estate Investment Trusts (Non-traded REITs)
Exchange-traded Notes

Exchange-traded notes (ETNs) can be easily confused with exchange-traded funds (ETFs). ETNs appear to be very similar to ETFs. They are traded on an exchange just like an ETF; however, an ETN is simply a contract between the issuer and the purchaser. The return of the investment may be designed to track the stock or bond market as a whole, certain segments of the stock or bond markets, certain commodities or currencies. The purchaser typically accepts credit risk or counter-party risk from the issuer—a bank or brokerage firm, for instance.

The problem is that some ETNs do a very poor job of tracking their intended targets. The Wall Street Journal article found in Appendix B describes just how badly, and how quickly things can go South.

Non-Traded REITs

A Real Estate Investment Trust (REIT) is a company which owns or finances income-producing real estate or mortgages. Many REITs operate the properties that they own. REITs are required to distribute at least 90 percent of taxable income to shareholders.

REITs may be publicly-traded on an exchange like any other stock, or they may be publicly-registered but not traded on an exchange. Publicly-traded REITs are fine to consider.

The dividend income for REITs is higher than the dividend income of other stocks. Yields can be even higher for non-traded REITs versus publicly-traded REITs. Non-traded REITs have less transparency and less liquidity than publicly-traded REITs.
When an investment lacks transparency, you should be very careful. Commissions, as well as operating fees can be excessive and it may be difficult to evaluate the value of the REIT’s assets. Certain non-traded REITs have suffered huge declines in value as described in the Investment News article featured in Appendix C.

REITs, ETNs are often used in certain retirement accounts—the subject of the next chapter.

Have a question? Contact Ed Mahaffy.

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Ed Mahaffy

Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and understand your tolerance for risk. Long-term relationships that encourage open and honest communication have been the cornerstone of my foundation of success.

Our approach is cost-effective and tax-efficient. As an independent investment advisor, we can offer you a personalized financial strategy, not a generic investment program. Your individual portfolio will be based on your unique situation, your values, your preferences and your goals. It will be designed to account for change, in the markets and in your circumstances.

As your professional partner, we’ll work hard to earn your trust and confidence, and provide the advice and service you deserve. Send me a note regarding any questions you may have about any particular investment concepts or products. We’ll get back to you quickly with a thoughtful answer.

Request A Copy of “How To Select A Financial Advisor” at

You can reach me directly at or call 501.603.0406

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