safety_first

“…receivers have estimated that the likely return to debenture holders will be 16 cents to the dollar.”

The quote above is from an article that saw some serious bans from providing financial services handed out, after the failure and mismanagement of a managed investment scheme.

Cases like this are why your financial planner might seem very worried about an investment that offers just an extra little bit of interest when compared to term deposits, and the marketing documents lead you to believe it’s a low risk investment.

Frequently, these investments have a much higher level of risk that isn’t consistent with the way they’re marketed.

To be clear, the receivers estimating a 16c return to the dollar means that if you invested $100,000 in this investment that was supposed to be safe, you will probably only be getting $16,000 of your money back. By the way, that $16,000 will probably also be after a lengthy period of investigation by the receivers, during which you’d receive no interest.

So sometimes it’s worth giving up that extra $1,000 pa in “extra interest” to ensure that your principal is returned in full, on time.

 

(photo credit: flickr user mattcrampton)