Do your investments pass the test?

Before you move your money, there are three questions you should ask.

Do your investments pass the test?

With interest paid on savings accounts and investments at incredibly low levels, it’s tempting to look for a high-return alternative. But before you move your money, there are a few simple questions you should ask yourself.

The Australian Securities and Investments Commission (ASIC) warns that many companies fail to disclose important information or make claims that are misleading. So, asking the following three questions of any investment company could help clarify the true value of their offers and give you peace of mind.

1. To whom are you giving your money?
Banks, building societies, credit unions, super funds and life insurance companies are the only institutions specially regulated to make sure that, under all reasonable circumstances, they can meet their financial promises. Otherwise, you’re taking an extra risk, such as when buying shares. And, if property is involved, your investments are not automatically ‘as safe as houses’. You alone have to judge the risk that the company to whom you lend may fail or default.

2. Is the interest rate unfeasibly high?
If your expected return seems high, it adds extra risk. Your proposed investment may be more risky than a typical fixed-interest investment. You may risk losing a significant amount of what you’re planning to invest, so it’s vital to check if you’ve got all the facts and whether you can handle those risks. These must be spelled out in the product disclosure statement or the prospectus, which the fund must give you.

3. Do you plan to put all your eggs in one basket?
Placing all your funds in one investment is extremely risky unless you’re putting the money into a deposit with a bank, building society, credit union, super fund or life insurance company. If things go wrong, your entire nest egg could be wiped out. Unless you can afford to lose all your money, spread your risk by spreading your investments.

You should never make any financial commitments without first discussing your needs and goals with an independent financial advisor.





    COMMENTS

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    8th Jun 2015
    12:24pm
    At the moment the share market is performing abysmally, even with conservative options. I would be VERY wary of investing money right now in even a low risk situation, no matter what your financial position is. I am certainly not a financial wizard, and no one is, but see monetary advances, for the greater part, being made only in those guaranteed-returns areas which are pathetically small, like term deposits. We Aged Pensioners and self-funded retirees are in a lose-lose situation right now with interest rates not keeping up with inflation and a deaf and heartless government when it comes to looking after it's senior citizens. Unless you're really share-cluey, and lucky, or have a confidante who is, I would suggest thinking at least twice before taking a chance of losing more money right now than what you are with low bank interest. The worst, I believe, is yet to come.
    PlanB
    8th Jun 2015
    1:07pm
    I have always been sure of 1/2 loaf rather than unsure of full loaf, if you get my drift
    Anonymous
    8th Jun 2015
    1:21pm
    Although man cannot live on bread alone one still does need bread in order to loaf, so, yes, I do get your drift, PlanB.
    Tigers
    15th Oct 2015
    6:00pm
    "deaf and heartless govt". Hmm, we're probably up there amongst the highest paid, best cared for medically, countries in the world when it comes to pensions, welfare etc. If people cant live on govt handouts, get a job, easy.
    Chris B T
    9th Jun 2015
    9:20am
    The only safe place is Banks, Credit Unoins or Building Societies with The Gov Guarantee $250k Deposit per Account.
    Poor returns, Atleast It Will Be Still There.
    Depends on what risk you want to take, not unlike gambling.
    Tigers
    15th Oct 2015
    6:02pm
    All investing is gambling, if it wasnt, everyone would be doing it. If you cant afford to lose it, leave it in a bank, simple.
    Tigers
    15th Oct 2015
    6:04pm
    Ignore the last sentence, stay well away from investment advisors. They're in the same category as Lawyers, Accounts, Car Salesman and Real Estate Agents.
    Pendrey
    30th Sep 2016
    9:32am
    Would agree with that.
    a. Be very conservative, the higher the rate the bigger the risk.
    b. Most important thing as we grow older is peace of mind.
    c. Enjoy your life.