Another day, other safe secure bullet proof investment falls over. That is if you believe the advertising hype. Back in April of this year I wrote two articles one being "Big returns big risks" and "Good advice is not always about what to buy" which highlighted the risk involved in making investments with out obtain advice from a professional. In these articles I mentioned the investment ACR which were advertising large interest returns secured by a first mortgage. Sounds safe? Was... Until they went into receivership with $330 Million dollars of investors money on Tuesday this week.
What would advice telling you not to invest all of your retirement funds into this have been worth?
Let's look at what they invested in, property development. Property is always assumed to have little risk. People base this assumption on their experience in owning their own house or rental property. In fact any property development is like any other business, there's a chance you'll get it wrong and lose your money. Unless, of course, you con someone into giving you their money. Then, like the directors of ACR you'll go home to your lovely big house in your wife's name out of the reach of the liquidators and the little old lady on the ad with the big bowling ball.
People talk about shares being high risk, this is mainly due to the fact that everyday we see the price of them change which for some people can be off putting especially when the price goes down. But at least you know where you stand and have the opportunity to limit losses if necessary. On Monday every investor in ACR thought their investment was worth what they paid, in fact it was worth zero. Which investment do you think has the higher risk level?
The Moral of the story?
The issue here is simply, that there are bad investments out there, never be afraid to pay for good advice. It's like insurance; you place no value on it until things go wrong. Much like the client I talked out of investing in Rawnet.
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Please contact us at ABN AMRO Morgan's Townsville on 07 4771 4577 for all your investing needs.