Posted on 08/17/2022 8:29:42 AM PDT by LouAvul
My advisors suggested Private Debt Funds. I'm interested in long term security; stable retirement funds as opposed to high risk/high profit.
Opinions?
If he’s taking a commission, run like the wind ...
Would need more info, but it sounds like you are being sold a fund which basically loans money to people/companies.
Is it a junk bond fund?
Why do companies go for private debt, when the best interest rates are had at large commercial banks? Often its because banks won’t lend to them.
What PCG88 said plus different strategies are used for someone in their 30s vs 40s vs 50s vs 60s etc.
A younger person can absorb more risk. A person in their 30s should be more aggressive into stock mutual funds. I stayed almost fully invested in stock index mutual funds until close to retirement. Of course one has to be tolerant of the ups and downs and losing half your 401K in crashes etc. Some people can’t do it. But that’s how you accumulate wealth.
I have no problem putting a portion of my money into municipal bonds myself. Tax avoidance.
Nothing against corporate bonds either but one would have to see which ones are being suggested and the rating — A vs B etc.
Never ask for investment advice without providing a full picture. Likewise, people should never GIVE advise without understanding the full picture. In your case: (1) are you retired now, or planning for retirement? (2) Do you have enough assets in your regular investment & savings accounts and retirement accounts to have a comfortable lifestyle now, or do you need these funds and income to live? (3) Do you have a spouse and/or dependents? Etc., etc. (4) Do you have other sources of income, including Social Security, pension, investment income?
All that said, I’m a big fan of Vanguard funds. The biggest drag on investment returns for most mere mortals are the fees paid in commissions and fund expenses. Vanguard funds (usually) have no commissions, and have very low fees. You can strike a relatively safe balance of stocks & bonds with just 2 funds - their global equities fund and global bond market funds. Just pick a balance commensurate with your risk tolerance and investment time horizon. If you’re 50 and retiring in 15 years, then something like 60/40 stocks/bonds might be appropriate. If you’re 70 don’t want much risk, so maybe a 70/30 or 80/20 bonds/stocks balance would be more appropriate.
But again, your financial situation and needs may be very different than the average person, so you’ll have to consider these parameters.
I sold private debt securities about 15 years ago. Lots of companies offer private debt instruments of all kinds. Only consider doing business if the securities are registered with the SEC. Not that that is any kind of guarantee. Its a sketchy business. Why would companies offer better than market rate return on their debt? because their risk is higher. Period. as a company, if I could go to lenders and get 10 million dollars of funding at market rates, why would I go to the private market and pay more? It’s because they can’t get a lender to give them the money because they don’t fit the lenders risk profile. I’d pass on it and keep looking. What are their loans that they make to people backed with? what is the collateral? doesn’t really matter, i wouldn’t do it.
The best financial advice I ever got, and which has served me well, quite well infact, was from a lawyer I hired for a house closing. He told me to hire a financial advisor who I will meet with for an hour or so every four months, and who I will pay by the hour. Open an IRA account, and a brokerage account at a low commission brokerage and invest sccording to the advisor’s advice. He told me to never buy anything but advice from the advisor, then I wouldn’t need to worry about conflicts of interest.
Why do companies go for private debt, when the best interest rates are had at large commercial banks? Often its because banks won’t lend to them.
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Business Development Companies typically lend money to lower or middle tier companies needing capital for a variety of reasons, and that is one of them. Credit markets are complicated and generally not suitable for the typical investor IMHO. A massive commitment to due diligence is required.
You could just cut out the middle-man and give your money directly to your local loan shark to loan at exorbitant rates. He handles the messy details like collections and provides a great return for your money.
Can you look up the daily price on an independent website? Can you sell it tomorrow if you decide it’s a bad idea? Is it something you could buy on your own without your advisor? A “no” on any of those would get me running in the other direction. I’d bet that the answer to all three is “no”.
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