A few weeks ago, we featured an article by John Nugée on the opportunities and risks of betting on Bitcoin. As John said in his article, buying bitcoins is not really an investment but the roll of a dice at the casino.
To a lesser extent, the same could be said for many “investment opportunities” sold to us on the basis of fantastic investment returns: the new development “off the shelf” in Ukraine, the latest offshore hedge fund from Madscam, the gold mining company about to strike gold in Brazil (yes, I fell for that one!).
If we put money into these schemes we are speculating NOT investing.
Investment experts choose diversity over one-off speculative purchases. A stock market expert with high conviction and confidence in his or her investment skills will still diversify risk by buying 30 or more shares. Likewise, a pension trustee board, with less conviction, will appoint one or more investment experts or invest in funds that give access to hundreds or even thousands of shares and bonds.
For trustees, and for you and me, investment diversity matters.
If our target is a return of 4% after fees and costs, the best way to achieve this is to invest in a diversified portfolio of shares, bonds and funds and to hold these investments for at least 10 years.
You can read more about how trustees approach investment in the article “Investing like a Trustee” first published by Booming Lives in September, 2014.
Melissa Longley will also be talking about this at our Forum on 14th March.
P.S. It is better to avoid all investment “introductions” from people you don’t know but, if in doubt, the FSA website has a list of known investment scams.