R
rainyday
Guest
I just love the 'Investment Traps to avoid' as detailed by Aileen Power of the Sunday Business Post in [broken link removed]. It was in the context of a few articles on extremely poor returns for those who had invested in 'educational funds' over the past decade, i.e. investment products supposedly designed to fund educational fees in the future. [broken link removed] managed to get a total annualised return of 0.14% over ten years!
I hope Aileen/SBP won't mind if I reprint the traps here. Please add in your own 'traps' and we'll make this a sticky thread if we get some great suggestions.
Traps to avoid
* Savings policies with entry charges. A 5 per cent entry charge will eat up a huge percentage of expected equity returns - projected at 6per cent per annum. Aim for zero entry charges and an annual management fee of 1 per cent
* Do not buy into the latest, greatest investment trend. Remember the fad of investing in ostrich farms in the 1990s, and the idea that low-cholesterol ostrich meat would sell for »10 per pound. Consumers didn't want to pay this amount for meat that didn't taste as good as steak. If an investment opportunity sounds too good to be true, it invariably is
* Be wary of buying property in countries you know very little about. Annual rental yields (returns) of 10 per cent may sound very attractive in the Czech Republic, Hungary, Romania and so on, but these will quickly be wiped out if you have to visit these countries to addressproblemswith your tenant, agent, solicitor andsoon. It is also much riskier buying and signing contracts in a language you don't understand
* Shop around and haggle. Financial advisers don't offer discounts, you have to ask for them. Don't be embarrassed, banks and insurance companies make very fat profits
I hope Aileen/SBP won't mind if I reprint the traps here. Please add in your own 'traps' and we'll make this a sticky thread if we get some great suggestions.
Traps to avoid
* Savings policies with entry charges. A 5 per cent entry charge will eat up a huge percentage of expected equity returns - projected at 6per cent per annum. Aim for zero entry charges and an annual management fee of 1 per cent
* Do not buy into the latest, greatest investment trend. Remember the fad of investing in ostrich farms in the 1990s, and the idea that low-cholesterol ostrich meat would sell for »10 per pound. Consumers didn't want to pay this amount for meat that didn't taste as good as steak. If an investment opportunity sounds too good to be true, it invariably is
* Be wary of buying property in countries you know very little about. Annual rental yields (returns) of 10 per cent may sound very attractive in the Czech Republic, Hungary, Romania and so on, but these will quickly be wiped out if you have to visit these countries to addressproblemswith your tenant, agent, solicitor andsoon. It is also much riskier buying and signing contracts in a language you don't understand
* Shop around and haggle. Financial advisers don't offer discounts, you have to ask for them. Don't be embarrassed, banks and insurance companies make very fat profits