Are we being totally conned by those professionals managing our pension funds and savings? Is searching for value across the globe, selecting investment opportunities, and then getting paid royally for the trouble just a racket?
Many would say yes – there is evidence that a child picking shares from a list with a pin could do as well as some fund managers.
The more sophisticated version of this is the low cost index tracking fund which, while never beating the best over any chosen period, always manages to do better than the worst. You can, after all, wear the Tour de France's coveted Maillot Jaune as overall race leader without ever coming first in a stage providing you consistently beat most on most days.
But let's leave the active vs passive debate to one side. Instead, why not ask those managers with their big bonuses why they don't just read their spam-mail and, if it is anything like mine, follow all the amazing 'big return with no risk' concepts that are sent their way each week.
Here's just a few of mine from the last seven days. They have ranged from oil leases in Kentucky to – and this is the most original – financing burials in South Africa.
Can an innovative investment offer minimal risk?
What about a 24% return in just 18 months? That beats every savings account by miles. Yet the blurb suggests my minimum £20,000 will be almost as safe as if I had deposited in Nationwide, Barclays or any other high street name.
This real estate investment is labelled “minimal risk”, but it is also “innovative” apparently. It is an investment basic that anything that is truly new is untried. If it works, great – there will be substantial rewards. However, most new ventures fail, no matter how promising their promoters make them sound.
[SPOTLIGHT]I would get “fixed returns” over eighteen months with a “guaranteed resell in 18 months”.
I could do this as well. If any reader wants to send me £20,000, I could send them £4,800 in a year and a half's time and give a “guaranteed resell”. But I have not specified the new value; I could just say £5,000. I now have £10,200 while the reader has £9,800. The real life example won't be a round figure and the email sender and assorted intermediaries will pick up a fair few thousand as well.
Investing in Kentucky oil wells
If I don't have £20,000, here's one for £7,000 minimum where I get a stake in oil wells in Kentucky.
I know very little about the economics of oil drilling in Kentucky (or anywhere else for that matter, I've always left it to Shell and BP) so I suppose I should be impressed by a promise of between 20% and 24% each year for 15-20 years. If I put in the same £20,000 as the previous offer, I would have £96,000 by 2034. Beat that, professionals!
It is not clear why such a magnificent return has not already been snapped up by various fund managers as it is clearly better than anything they could do with such remarkable consistency over the next two decades.
Another guarantee!
I'm still waiting for more details of the South African burial investment, but in the meantime I can put in as little as £2,500 into shipping containers and make 12% a year for years to come. This is not “guaranteed” but I am told that history shows the returns have “always been higher”. So the 12% is really the minimum. And in case I am worried where my box will end up, the people behind this particular scam assure me that it will be sent to an “emerging market”.
Containers revolutionised international shipping and dockside work around 40 years ago. There are millions floating around the world or in railway or road haulage depots. Big shipping lines and freight companies own them. It is a very high tech industry with each box closely monitored. So what would I get for my £2,500?
I could get a small second hand container which has seen better days but could be perfectly adequate for storage. That is fine but still does not explain where I get my 12% regular leasing income from. Nor does it address the issue of how long a battered, used box would last. It's certainly not forever if it's on the road earning money. And there is a big selection at far lower prices on Gumtree!
Fund managers are not stupid. They know that if something looks too good to be true, then it's not true.
More on scams:
Hope for victims caught out by Brazil investment scam
The scammers that called themselves Mr Gold and Mr Silver
The rise of wine investment recovery room scams
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