Many investors have sustained significant losses as their Broker/Financial Advisor has recommended they purchase gold or other precious metals.
Many gold or precious metal funds actually contain substantial risks as they are highly leveraged, unbeknownst to many investors. Also, many of these gold funds are inverse funds, so they have the opposite effect depending upon the movement of the underlying commodity.
Some Financial Advisors have recommended investing in mining companies instead of the underlying commodity, when in reality it’s a completely different type of investment and does not necessarily trade with the underlying asset.
According to The Securities Law Firm of Menzer & Hill, P.A., many investors are led to believe that gold is a great hedge to the stock market and because it had such a significant pullback that makes it a great investment, which is not the case. Also, many financial advisors are purchasing leveraged gold funds which entail significant risks.
Under FINRA rules and regulations, those Brokerage Firms and/or Financial Advisors that fail to adequately inform their customers of the risks involved with investing in commodities, or over-concentrated their portfolios, may be held liable for customer losses through a FINRA arbitration.