I am 83 and my wife is 70. We are mortgage-free.
Earlier this year we were advised by a reputable investment company to put all our savings ($350,000), which had been sitting in a major bank, into a range of shares to “secure our future”. To date we have received a total of $6849 in returns, varying monthly from $305 to $1871.
This has been a whole new venture, the sharemarket, and I find it hard to read statements and newsletters and bulletins.
This return, combined with our superannuation, is our total source of income.
Having screened through the above article, I’ve nearly brought up my sips of tea from the breakfast. Putting age and risk profile aside, the return from the portfolio is just a net 1.96% in 9 months, or a net 2.61% pa (annualised). And note, the portfolio is filled with shares, whether they are NZ shares or international shares, it does not matter; what matters is that portfolio carries very significant risk, and yet the return apparently under-performed the global indices, even though the world stocks exchange has risen to new records for the past 8 months!
What’s the interest rate NZ banks pay for the savings on call? It ranges from 0.35% to 2.75% pa; and how much do they pay for term deposits? Ranges from 0.75% pa to 3.45% pa. Do you have the idea now?
The investment company (represented by its commissioned employee) clearly did a good job in selling financial products to ignorant clients; the clients, however should be largely responsible for their financial success or failure. Should we condemn the investment company for its practice? Yes we should, but I’d blame the clients more if their investments turned out to be a loss. Why? I can think of two reasons:
- Greed – at 80 the client should be aware that he’d better play safe however he still bet on volatile investments like shares;
- financial ignorance – not knowing the nature of the investment he would be investing in; not knowing returns available from other investment tools; and being ignorant of the financial cycles and global economic news
Q & A
Q: Will he be better off if he was financially educated?
A: Sure he will!
Q: What do I mean by financially educated?
A: Learn the subject by heart, take action, learn from mistakes and self-correct.
Q: How will he be better off if he’s financially educated?
A: He can invest or trade on his own; alternatively pick the best adviser to do the work at his instruction, this way he still has the control and final say.
Just remember, investing or trading is not risky, but the person who does it may be!
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