# Investment Traps to avoid



## rainyday

I just love the 'Investment Traps to avoid' as detailed by Aileen Power of the Sunday Business Post in [broken link removed]. It was in the context of a few articles on extremely poor returns for those who had invested in 'educational funds' over the past decade, i.e. investment products supposedly designed to fund educational fees in the future. [broken link removed] managed to get a total annualised return of 0.14% over ten years!

I hope Aileen/SBP won't mind if I reprint the traps here. Please add in your own 'traps' and we'll make this a sticky thread if we get some great suggestions.

*Traps to avoid*

* Savings policies with entry charges. A 5 per cent entry charge will eat up a huge percentage of expected equity returns - projected at 6per cent per annum. Aim for zero entry charges and an annual management fee of 1 per cent 

* Do not buy into the latest, greatest investment trend. Remember the fad of investing in ostrich farms in the 1990s, and the idea that low-cholesterol ostrich meat would sell for »10 per pound. Consumers didn't want to pay this amount for meat that didn't taste as good as steak. If an investment opportunity sounds too good to be true, it invariably is 

* Be wary of buying property in countries you know very little about. Annual rental yields (returns) of 10 per cent may sound very attractive in the Czech Republic, Hungary, Romania and so on, but these will quickly be wiped out if you have to visit these countries to addressproblemswith your tenant, agent, solicitor andsoon. It is also much riskier buying and signing contracts in a language you don't understand 

* Shop around and haggle. Financial advisers don't offer discounts, you have to ask for them. Don't be embarrassed, banks and insurance companies make very fat profits


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## ClubMan

Don't buy into investments that you don't understand whether it be shares in companies whose business models or products/services are impenetrable to you, certain investment products (such as tracker bonds or split deposit/trackers) with arcane terms & conditions and opaque charging structures, property if you know nothing about the tax and ongoing management implications.

If an offer sounds too good to be true then it probably is!


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## daltonr

Don't get caught up in the hype of buying something that has already made a lot of people rich.  Too many people bought internet shares "After" hearing about people getting rich.  Too many people have bought to let "After" seeing huge house price increases.  

There is a long an sorry tradition of investments getting popular only when they have already become overvalued.  Late investors often serve little purpose other than providing early investors with a market to sell into.

If you can see a gravy train, chances are it has already left the station.

-Rd


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## ClubMan

I liked the one that was posted here a while back - never buy a financial product advertised by _Linda Martin_ or any former cast member of _Glenroe_! :lol


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## daltonr

Any product that promises to "Clear your debts" AND "Give you a WELL DESERVED Holiday" AND Put cash in your pocket.

Should be avoided.  If you have no choice but to use a consolidation loan then borrow the absolute minimum, over the shortest time frame you can afford.

----

If a financial institution offers you another product while you are in the middle of buying one.  It's almost always a good idea to say no.

-Rd


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## JaneBloggs

*Re: anything called a PIP or a PEP sold by an Irish Bank*

I wish someone had told me that good piece of advice before I set up my BOI PIP.
I'm now setting up a Quinn Life Freeway Fund with my extra savings.

Had to laugh at the comment about Linda Martin et al.


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## rainyday

*Re: anything called a PIP or a PEP sold by an Irish Bank*

Some useful do's & dont's in today's Sunday Business Post (If links don't work, use their [broken link removed] facility to check articles for 6th March 2005)

[broken link removed]

[broken link removed]

[broken link removed]


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## ClubMan

*Re: anything called a PIP or a PEP sold by an Irish Bank*

*Tracker yields fall short*

This article really should have pointed out that a particular institution's "advisors" are really just sales people and that people should look elsewhere if they want something approaching . At least they did point this out in the second article linked:


> Don't mistake shopping around for independent financial advice. “You don't get advice by shopping around and talking to firms – that is just sales talk,” said Eddie Hobbs of the Consumers' Association of Ireland.


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## niallliam

daltonr said:


> Any product that promises to "Clear your debts" AND "Give you a WELL DESERVED Holiday" AND Put cash in your pocket.
> 
> Should be avoided. If you have no choice but to use a consolidation loan then borrow the absolute minimum, over the shortest time frame you can afford.
> 
> ----
> 
> If a financial institution offers you another product while you are in the middle of buying one. It's almost always a good idea to say no.
> 
> -Rd


 
This is poor advice.  Part of a financial advisor's job is to offer overall financial advice.  Part of that might be to set up a life policy whilst making an investment.  If this advice was not offered a client could potentially end up in a false sense of security and have no family protection.  My view would be: listen to advice carefully and ask plenty of questions.  If satisfied proceed, if not either ask more questions or take sometime to think.  Do not just dismiss quality advice out of hand!!


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## ClubMan

My advice would be talk to somebody more independent than a tied agent and treat recommendations from tied agents with extreme caution.


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