You have been warned!

You have been warned

I read an article by Bruce Cameron “ How many more investors must get burned before our warnings are heeded?”

In the article he mentions the dangers of property syndication schemes.

He goes on to say…”In most cases, the problem with property syndications is that the costs, including fees taken upfront by syndication companies and the extraordinary high commissions paid to so-called financial advisers to flog the syndications, result in artificially high valuations. When the property market turns sour, so do many of the syndications.

“One of the first cases about which we issued clear warnings was Jack Milne’s PSC Guaranteed Fund in which investors placed more than R200 million despite our advice. Our warnings proved correct, and Jack Milne went to jail for a year.”

Unfortunately I didn’t listen to Bruce Cameron then. I personally invested in the PSC Guaranteed Growth Fund and lost millions.

Worst still, I recommended family members to invest in the fund and they lost their money. I felt so bad about this that I borrowed money to pay them all back –  what they had lost.

This was an expensive lesson which taught me how important it is to take responsibility for your own money and NOT to give financial advice.

P.S. I don’t give financial advice – only “my opinion on what I would do in a given situation.”

Further he warns: “Over the years, we have advised you to exercise caution with many other investments. These have included:

Currency Trading: This is a gamble, and very few people get it right. Currency trading is also a playground for crooks, such as Leaderguard, where millions were lost by investors. Yet currency trading is still advertised widely on television as being an investment where you can make big returns. It is more likely to cost you everything.

Hedge Funds: These are very opaque investments with extremely high costs that are sold on the basis that they can protect you against the vagaries of the markets. Yet at the very time the markets ran into trouble in 2008, most hedge funds failed to deliver on their promises. In fact about half the hedge funds internationally closed shop.

Unlisted Shares: Almost every time a scam or high-risk investment is in the offing, it will involve the sale of unlisted shares. The reason is that there is no effective regulation. The unlisted company can be investing in anything from property to mines(remember Eldorada?), promising huge returns, which, it is often claimed, will be realised once the company lists on a stock exchange. Not all unlisted companies are scams. The problem is that you need time and expertise to be able to identify the good ones.

Life assurance endowment and retirement annuity policies: It is not that the life companies will steal your money. The problems lie with the structure of the products namely costs commissions and penalties. Both investment vehicles are sold on the basis that a maximum of half the commission will be paid upfront. That, plus the other costs, is why the life company makes you sign a commitment to pay the premiums or keep your money invested for a fixed number of years. If you do not, it will levy a penalty on your accumulated savings. The problem is that no one knows what the future holds. For example, many people cancelled their life assurance contracts during the recent recession, particularly when they lost their jobs. So when you are down, you get kicked again – in the form of penalties. The proven high cost of most of these products also too often results in poor returns.”

I have a lot of respect for Bruce Cameron’s opinions.

P.S.  Clever people learn from other peoples mistakes.

P.S.S.  Please learn from mine !

Gordon Mackay

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