15 April 2013

Investors gullible and naive - study

"Delegating responsibility for investment decisions make investors vulnerable to the choices of professionals, choices that may be opaque, shielded from market discipline or tainted by conflicts of interest." A study of investment behaviour illustrates 'terrible investment habits' of American investors and the need for impartial advice.

14 April 2013

How does your Adviser rate on investment process?

An article in Barron's magazine raises an interesting point when it argues that individual investors would benefit from an institutional approach to the way their investment portfolios are handled. But quarterly portfolio reviews require a certain amount of sophistication on the part of the investors that may not always be available - apart from the question whether they are willing to dedicate the required time and effort (or whether they possess the minimum of investment skills necessary to do so). So in the end investors are well advised to rely on experienced and trusted gatekeepers when engaging investment managers.

10 April 2013

Fee, Kick-back or Bribe?

It literally pays to check (CNBC/Reuters)whether your adviser gets paid for putting your money into certain funds or other investment products.

3 April 2013

CoCo's are NoNo's

One would have thought that the main lesson of the Credit Crunch and Financial/Economic Crisis is the danger that can be created by newfangled and little-understood financial 'innovations'. The need for banks to raise additional capital has led to the design of 'Contingent Convertible Bonds' (CoCo's for short). These bonds lure investors with relatively high nominal interest rates that make them appear attractive to those who are desperate to get some positive return on their investments. Even so-called sophisticated investors in large financial institutions get tempted. Partially because they do not play with their own money or they will long have moved on to other jobs or positions when the proverbial s*** hits the fan. They may also not be as sophisticated as their clients (pensioners, mutual fund savers and private clients) assume. It will be interesting to see how regulators treat these securities if they become more of a mainstream investment option. They will have to decide whether their role is to protect the banking establishment or the investors. We know on which side they should be and we are definitely siding with the investors on this issue. Dangerous bets such as CoCo bonds should not be in any investor's toolkit but should be strictly reserved for regular visitors to casinos and betting shops. Not for nothing the link above talks of a ticking time-bomb with respect to these securities.