One lesson about investing that is best learned from somebody else.
How do you invest your SMSF money? A hot breakfast topic.
Before playing a game of golf, I had breakfast with a group of guys who run their own Self Managed Super Funds (SMSF). About halfway through the breakfast we got onto the topic of SMSFs.
I am sure if you have your own SMSF you would have many of these conversations with your friends:
If you run your own fund, where do you invest your money?
The insurance advisor at the table said that at the moment you should have your money spread everywhere, so long as most of it is in cash….so spread it anywhere so long as it is in cash.
So what kind of return are you getting in cash at the moment?
5 or 6% depending on the type of terms etc.
So what about property?
Well yes this is great but the return is only 3% rental and the asset price is going backwards and deflating.
So if not already in property, now is not a great time to buy.
Probably not a great idea at the moment due to what is going on in the rest of the world, also companies do come and go.
So let’s get this straight, if you have your own SMSF and you have your money spread around with most in cash, the most return you will get at the moment (assuming you don’t want to take too much risk), is about 5%.
I then floated an idea across my breakfast table:
What if you could get a return of 9% on your money?
The answer, was obvious and a resounding response of YES.
Only thing here is that in order to get a higher return that would come with an increase in risk right?…..Unfortunately there is no such thing as a free lunch.
In order to get a higher return there will be a compromise.
What is that compromise?
In most cases the increase in return results in a massive increase in risk and to date most often ends in tears. The devastating collapse in Managed Investment Schemes who have offered fixed returns over and above that of bank rates has left many lives in tatters.
Does it really matter why they all collapsed? Well yes I guess it does. There are in fact many reasons.
But here is one thing you can learn about investing your money with other people and for whatever reason the managed investment schemes collapsed, there is a common lesson above all.
What is that lesson?
The lesson is:
The only thing you learn from investing money with other people, is not to invest your money with other people.
Why am I sharing these thoughts with you? Stay tuned to find out.
P.S. Here is a hint: www.armortgages.com.au