Good, Bad and Ugly

Jonathan Clements

EVEN BAD FINANCIAL products and strategies turn out okay for some investors. If that wasn’t the case, they probably wouldn’t attract enough customers to survive, no matter how aggressively they’re peddled. Still, some are so risky or so costly that the chances of a happy outcome are slim. Want to improve your odds of financial success? Here’s how I would categorize the products and strategies on offer today:


  • Buying stocks on margin
  • Leveraged exchange-traded index funds
  • Day trading
  • Short selling
  • Writing naked call options


  • Cash value life insurance
  • Variable annuities
  • Equity-indexed annuities
  • Hedge funds
  • Market timing
  • Options trading
  • Technical analysis
  • Structured products
  • Load funds
  • Unit investment trusts
  • Closed-end funds bought at the initial public offering
  • Non-traded REITs
  • Brokers on commission
  • Carrying a credit card balance

Proceed with Caution

  • Actively managed funds
  • Individual stocks
  • Bonds bought in the secondary market
  • Closed-end funds at a discount
  • Rental properties
  • Vacation homes
  • Interest-only mortgages
  • Reverse mortgages
  • Long-term-care insurance
  • Claiming Social Security early


  • Index mutual funds
  • Exchange-traded index funds
  • High-yield savings accounts
  • Certificates of deposit
  • Treasury bonds
  • 401(k) plans
  • IRAs
  • Health savings accounts
  • Term life insurance
  • Rewards credit cards
  • Owning your primary residence
  • Conventional mortgages
  • Home-equity lines of credit
  • Immediate fixed annuities
  • Deferred income annuities
  • Claiming Social Security late

The bottom line: With so many products in the promising category, why risk owning anything else?

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