Benefits to Investing in High Yield Investments - High Yield Investments
We have visited this subject many times, but make no apology for doing so again. If you currently have investments in Unit Trusts, Stocks & Shares ISAs or Pensions, or are planning to do so, then reading this article could save you a small fortune over, say, 10 - 20 years. Let's take a look at the typical costs you are faced with when you invest your money: Initial Costs This is the percentage of the investment that you pay up front and is taken from the product you are investing in. If you are using a Financial Adviser, we believe that the maximum percentage you should pay is 4% of the amount you are investing, with a sliding scale down to 1% for larger sums, regardless of which type of 'product' (pension, ISA, etc) you are investing in.
Ongoing Annual Costs These are not just the Annual Management Charge (AMC), typically 1.5%, but since there are also other administrative costs such as trustee fees, legal and auditors costs etc, the figure to illustrate these is known as a Total Expense Ratio (TER). This can be, say, another 0.2%, and so you would think that the overall annual cost is therefore 1.7%. However, there is a missing cost which can double or even treble (or more) this amount, and it is very unlikely you would ever know about it, as the information tends to be buried in the paperwork you receive. These are costs that the fund incurs for trading - buying and selling stocks - known as Portfolio Transaction Costs (PTC), OR Portfolio Turnover Rate (PTR) and they are not included in the TER. The more active a fund manager is buying and selling stocks, the higher will be the costs incurred. They include: 1. Cost of Commissions - Stockbroker's charges for executing and then clearing a trade 2. Spread Costs - The bid / offer spread is the difference between the prices at which shares can be sold and bought 3. Market Impact Costs - Costs which are incurred when the price changes as a result of the effort to buy or sell that stock 4. Cost of Tax - In the UK there is stamp duty to be paid with trading 5. Opportunity Costs - This is the cost of a delayed or missed trade One of the amazing things we find is that not only do investors not know about these extra costs that have an impact on the returns you will receive, but some financial advisers do not know about them either!
Another option is investing in dividend paying stocks. People on the verge of retirement opt to invest in them as they provide a steady source of income. The income is there, but only till the company is making money.
In order to select the right high yield investment program, following are the factors that can better help you in this regard. The first point in this regard is research. If you are looking for the online investment options, make extensive research about whether the company you want to deal with is a real company or scam.
They want you to buy their funds because they 'outperform the market'. However, as academic research constantly shows, very few funds do this year in year out, and although you can LOOK BACK and see a few funds that have done this out of thousands, try to do this LOOKING AHEAD! As Ron Ross, Ph.D., writer of 'The Unbeatable Market' said - "Active [investment] management is little more than a gigantic con game". We feel that an adviser who is able to give you access to funds with lower overall costs, and is able to deliver a better investment experience on a sustainable basis should be rewarded for this. Invariably, we can also tell a new client the growth rate they need on their investments to achieve their goals that they have identified with us. Nine times out of ten we can reduce the risks they are currently taking, as the financial map we create gives us this capacity. We believe achieving your goals whilst taking the MINIMUM risk is a very sensible approach. As an example of how 'performance drag' can affect the returns you experience, a fund with costs that are, say, 1.5% per annum lower over 20 years, and using a 7% gross projected growth rate, you would find that the resulting fund would be around 30% higher.
Carefully analyze around three to five years of past performance of a company. This would give you an idea about how a company is being performing when there was downturn in the economy or the other companies were enjoying success. - 23217
Ongoing Annual Costs These are not just the Annual Management Charge (AMC), typically 1.5%, but since there are also other administrative costs such as trustee fees, legal and auditors costs etc, the figure to illustrate these is known as a Total Expense Ratio (TER). This can be, say, another 0.2%, and so you would think that the overall annual cost is therefore 1.7%. However, there is a missing cost which can double or even treble (or more) this amount, and it is very unlikely you would ever know about it, as the information tends to be buried in the paperwork you receive. These are costs that the fund incurs for trading - buying and selling stocks - known as Portfolio Transaction Costs (PTC), OR Portfolio Turnover Rate (PTR) and they are not included in the TER. The more active a fund manager is buying and selling stocks, the higher will be the costs incurred. They include: 1. Cost of Commissions - Stockbroker's charges for executing and then clearing a trade 2. Spread Costs - The bid / offer spread is the difference between the prices at which shares can be sold and bought 3. Market Impact Costs - Costs which are incurred when the price changes as a result of the effort to buy or sell that stock 4. Cost of Tax - In the UK there is stamp duty to be paid with trading 5. Opportunity Costs - This is the cost of a delayed or missed trade One of the amazing things we find is that not only do investors not know about these extra costs that have an impact on the returns you will receive, but some financial advisers do not know about them either!
Another option is investing in dividend paying stocks. People on the verge of retirement opt to invest in them as they provide a steady source of income. The income is there, but only till the company is making money.
In order to select the right high yield investment program, following are the factors that can better help you in this regard. The first point in this regard is research. If you are looking for the online investment options, make extensive research about whether the company you want to deal with is a real company or scam.
They want you to buy their funds because they 'outperform the market'. However, as academic research constantly shows, very few funds do this year in year out, and although you can LOOK BACK and see a few funds that have done this out of thousands, try to do this LOOKING AHEAD! As Ron Ross, Ph.D., writer of 'The Unbeatable Market' said - "Active [investment] management is little more than a gigantic con game". We feel that an adviser who is able to give you access to funds with lower overall costs, and is able to deliver a better investment experience on a sustainable basis should be rewarded for this. Invariably, we can also tell a new client the growth rate they need on their investments to achieve their goals that they have identified with us. Nine times out of ten we can reduce the risks they are currently taking, as the financial map we create gives us this capacity. We believe achieving your goals whilst taking the MINIMUM risk is a very sensible approach. As an example of how 'performance drag' can affect the returns you experience, a fund with costs that are, say, 1.5% per annum lower over 20 years, and using a 7% gross projected growth rate, you would find that the resulting fund would be around 30% higher.
Carefully analyze around three to five years of past performance of a company. This would give you an idea about how a company is being performing when there was downturn in the economy or the other companies were enjoying success. - 23217
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