Was listening to WGN this morning and the financial advisor was quite adamant about rolling over funds in my 401k and IRA into a commercial market bridge loan. He said it will be a safe haven for our money for the next year. He also said that there is no penalty to roll it over and no penalty to bring it back when the market settles down. He also said that there is a 6 percent return on the money for the year in the bridge loan. This sounds almost too good to be true. Thoughts? How would we go about doing this? Thank you.

Terry Says:  I am answering in boldface because:  YES, THIS IS TOO GOOD TO BE TRUE!!   There is no such thing as a larger return without a larger risk!  And the return doesn’t even begin to compensate the risk in these deals — which are basically pools of loans.  You are making loans to strangers, companies who turn to these lenders because they cannot get a traditional loan from a bank!!

You’d be better off buying a bridge than a bridge loan!!  These pools are “secured” only by the spreading of risk over many risky loans in the pool, and the ability to collect on (sell) the assets behind the loans.  But when the economy turns sour (and it might) there is no federal guarantee as there is in bank deposits.  You can get in line and wait for your money to be returned from these commercial bridge loans.   This bubble hasn’t popped yet — but it will make headlines one day.

In short, the only one getting a good deal on these “things” (I refuse to call them investments) is the BROKER.   He gets the commission on selling these to you!   Find another “financial advisor,” please!!

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