Financial engineering?

Engineers are believed to be doing very well in financial services, especially in the areas of complex derivatives using Mathematical models.

Logically, the purpose of engineering should be either to increase returns for the investors or reduce the risk on investments. In many cases, exactly opposite happens. Either the investment returns go down or the risk goes up or both. Here is another such case that promised to offer both the promise of capital safety and higher returns. Read the article to know the final outcome. Those interested in further analysis, may also like this blog post by Joshua Brown, the reformed broker.

When there is excess money in hand and when the yields are low, very often investors chase yields – something that seems to be offering (promising) higher yields than available in the market is lapped up even by ignoring the risks involved.

Investors beware. Caveat emptor. Don’t invest in something you don’t understand.

When ignorance and excess liquidity meet, the results often are interesting case studies for future generations.

#RidingTheRollerCoaster – 237

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