With Profit Bonds – How exactly don’t they work?
Following on from last week’s with profit bond comments I thought I would use this week’s column to explain exactly how they work – without the salesman and insurance company’s noise. Let’s look at why investors invest, how they understand risk, and how with profits are contrived to sell to that fear.
Death of With Profits – At Last
I am hoping that twelve years after writing my first column on with profit bonds that this will be one of my last. I faced heavy criticism from many about the initial articles, but thankfully the basic natural laws brought this contrived rip off ‘investment’ crashing to its knees.
A Rock and A Hard Place for Savers
Talk about being stuck between a rock and a hard mountain. Savers today are enjoying the paltry returns of c2.8% for instant access savings and 3% for a one year fixed bond.(1) That’s the rock. Over their shoulder is the rugged mountain of inflation squashing any potential returns they may have. Inflation currently sits at 3.5%, meaning that a basic rate tax payer will be ‘enjoying’ 2.24% whilst inflation corrodes the real value of their capital at a rate of knots.(2)
Potential for Catastrophic Losses
When something doesn’t make sense, it isn’t sensible. President Obama proudly announced he would ‘fight’ the banking institutions who were using our money to buy up investments in commodities making record profits at the same time. The natural reaction to this was that banks’ share prices took a tumble. Interestingly Mr Obama announced this on the 21st Jan ’10. What is perhaps worrying is how commodity prices have reacted.
Obama vs. Banks. What it means to you
If you fully understand what Obama is doing with the swashbuckling banks, you will note the financial world as we know it will never ever ever be the same. In May 2008, I wrote a column 1300 words long, which said that banks were at the heart of spikes in commodity prices such as oil, wheat, maize etc. That article was pretty much ignored by the investment companies who were making so much money off the back of it – until they weren’t. That was the day that oil plummeted and every other commodity with it.
Cautious Investors Could Lose Millions
Cautious investors could easily become fooled by some of the investment options available on the high street; and judging by the millions poured into so called ‘guaranteed products’ investors must clearly be reading information I am not.
Cautious Investor 85% Better Off
Is there really that much difference in performance between investment funds or are they all much of a muchness as I have some investments and pensions and I have no way of knowing whether or not I am getting the best performance for my money or not?
Unsuspecting Business People Refinance Banks
A pre-budget report just before an election is never going to be too painful. If we expected anything other than vote winning ideas we were unrealistic in our expectations. Such was my lack of interest; I avoided doing any of my normal phone ins and newspaper/website contributions and went to watch Snow Patrol with the […]
Pensions and overseas banks leading the way for business finance
My bank is telling me that it is still very active in lending in the commercial market but they are not supporting me and my commercial finance broker is struggling to assist me with my business finance. Are banks really being more relaxed with their lending or is this all hype?
£28,876 Cost To Use An Estate Agent Financial Adviser
Buying a home, and in turn ascertaining which are the best financial solutions for your family is rated one of the most stressful scenarios you can possibly go through. It is most amazing the sales tricks that are applied by salesmen at estate agents who now seem to be ‘financial advisers’. In a number of recent scenarios we have heard of estate agents insisting that customers see their mortgage adviser before they are allowed to view a property, a highly dubious if not illegal practise that could be costing customers and homeowners’ families tens of thousands of pounds.
Who’s behind petrol prices?
‘Oil sharks sit off Brixham coast’. ‘Dear oh dear’ I thought as I passed the newsagent window. And like most of these things I yawned and resigned myself to that old saying ‘it’s like that déjà vu all over again’. So is there any credence to the fact that bad boys are sitting off the coast ripping us off? I can’t believe I am even giving this space but here goes: Firstly, when oil was driven to $147 last year the resulting petrol price (which was blamed on oil) was less than it is today. Crude oil is priced at $77.07 today. (1) Explain that then.
Advice for Lottery Winners
£45.5 million. That surely is a good Saturday morning reading when you pick up your lottery winnings. But it isn’t all plain sailing as some of you might think! Consider the problems Les and Samantha, the lottery winners now have. There may be some mild sarcasm to follow.